For each requirement, generally 1 mark for each matter discussed:

(a) Grouse Co

– Situation is a close business arrangement giving rise to threat to objectivity
– Explain self-interest threat
– Explain intimidation threat
– Only acceptable if financial interest immaterial and relationship insignificant
– Sale of software to audit clients would require full disclosure of financial benefit
– Sale of software to audit clients creates self-review threat
– Sale of software perceived as providing non-audit service
– Risks heightened for listed/public interest entities
– If enter business arrangement must withdraw from audit of Grouse Co
– Commercial consideration – demand for product
– Commercial consideration – experience of partners

Maximum marks 8