Marie Janes encounters the following situations in doing the auditof a large auto dealership. Janes is not a partner.1. The sales manager tells her that there is a sale (at a substantial discount) on newcars that is limited to long-established customers of the dealership. Because herfirm has been doing the audit for several years, the sales manager has decided thatJanes should also be eligible for the discount.2. The auto dealership has an executive lunchroom that is available free to employeesabove a certain level. The controller informs Janes that she can also eat there any time.3. Janes is invited to and attends the company’s annual Christmas party. Whenpresents are handed out, she is surprised to find her name included. The presenthas a value of approximately $200.Use the three-step process in the AICPA independence conceptual framework to assesswhether Janes’ independence has been impaired.a. Describe how each of the situations might threaten Janes’ independence from theauto dealership.b. Identify a safeguard that Janes’ firm could impose that would eliminate or mitigatethe threat of each situation to Janes’ independence.c. Assuming no safeguards are in place and Janes accepts the offer or gift in eachsituation, discuss whether she has violated the rules of conduct.d. Discuss what Janes should do in each situation.
Marie Janes encounters the following situations in doing the audit
of a large auto dealership. Janes is not a partner.
1. The sales manager tells her that there is a sale (at a substantial discount) on new
cars that is limited to long-established customers of the dealership. Because her
firm has been doing the audit for several years, the sales manager has decided that
Janes should also be eligible for the discount.
2. The auto dealership has an executive lunchroom that is available free to employees
above a certain level. The controller informs Janes that she can also eat there any time.
3. Janes is invited to and attends the company’s annual Christmas party. When
presents are handed out, she is surprised to find her name included. The present
has a value of approximately $200.
Use the three-step process in the AICPA independence conceptual framework to assess
whether Janes’ independence has been impaired.
a. Describe how each of the situations might threaten Janes’ independence from the
auto dealership.
b. Identify a safeguard that Janes’ firm could impose that would eliminate or mitigate
the threat of each situation to Janes’ independence.
c. Assuming no safeguards are in place and Janes accepts the offer or gift in each
situation, discuss whether she has violated the rules of conduct.
d. Discuss what Janes should do in each situation.
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