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　　（b）Independence risks
　　Audit partner – time in office
　　Mr Grace has been the audit partner of Ancients for eight years. His obijectivity for the audit may be threatened by the ongoing close relationship with the client. In other words, he may be too friendly with the directors of Ancients. This means he may not be willing or able to take difficult decisions such as issuing a nodified audit report for fear of prejudicing his friendship with the directors. Rotating the audit partner world remove this threat.
　　Unpaid taxation fees
　　Ancients has not paid the taxation fees for work that took place nearly six months ago. The non-payment of fees can be a threat to objectivity similar to that of an unpaid loan. In effect, MacKay is providing Ancients with an interest free lan. The audit partner in McKay may not wish to issue a modified report for fear that the client leaves and the ‘loan’is not repaid. The unpaid fee must be discussed with the directors in Ancients and reasons for non-payment obtained. McKay may wish to delay strating the audit work for this year until the fee is paid to remove the potential independence problem. If the fee is not paid at all then McKay may decline to carry out the audit.
　　Fee income
　　No details are provided regarding fee income obtained form Ancients. Howver, the company is growing rapidly and McKay does provide other services besides audit. As a limited liability company, McKay should ensure that no more than 10% of its recurring pratice income （including auditing, accountancy and other work combined）is derived form this cliend. Obtaining more than 10% could indicate undue financia reliance on one client, and inpair objectivity regarding the audit report（again fear of issuing a modified report and losing the fee income from the audit client）. If the 10% linit is close, McKay may have to limit other services provided so that independence is not impaired. An annual review will be required on clients where the fee is between 5 and 10% to ensure that the fee income rules will not be breached.
　　Allyson Grace
　　Allyson Grace is not deemed to be connected to Mr Grace because she is presumably over the age of 18. If she was still a minor, then there would be a connection and it would be inappropriate for Mr Grace to be the audit partner as he could in theory influence Allyson’s decisions. However, there may still appera to be an independence problem as Mr Grace may not be objective in making audit decisions. He may not wish to annoy his daughter by having to qualify the financial statements. Appointing another audit partner would remove the perceived independence problem.
　　Meal
　　The offer of a meal by Allyson may appear to be a threat to independence; having received an expensive meal, the audit staff may be favourably disposed towards Ancients and be less inclined to investigate potential errors. Audit staff are allowed to receive modest benefits on commercial terms; whether there is a benefit depends on how expensive the meal is. To ensure no independence issues it would appear that the invitation should be declined. One possible option world be for Mr Grace and Allyson to pay personally as a purely social event even though this may be unlikely. However this does not remnoe the impled independence issue.