Generally 1 mark for each point identified and discussed:

Tetbury Co

– Customer due diligence/know your client procedures to be performed
– Audit firm’s competence to audit a financial services client
– Acceptance decision should also include consideration of ethical threats
– Management integrity threatened by past investigation by financial services authority
– Integrity also threatened by possible inappropriate financial reporting 
– Management may have intimidated the previous auditors
– Contact previous auditors for further information
– Controls appear weak leading to high audit risk
– Responses to high risk should be considered, e.g. use of experienced audit team
– Confirm client’s intention to improve controls
– Threats to objectivity arise from giving business advice – perceived as assuming management responsibility
– Self-review and self-interest threats created
– Safeguard to be put in place, e.g. management acknowledge responsibility for business decisions

Maximum marks 8