Question

Cloud 9 - Continuing Case Sharon Gallagher, Josh Thomas, and Jo Wadley work for the audit firm W&S Partners. Sharon is an audit manager, Josh is an audit senior, and Jo is an audit partner. They meet to discuss the results of a survey of other offices of W&S Partners, as well as their own office. The survey was directed toward determining if W&S Partners had any independence problems with respect to a new prospective client, Cloud 9 Inc. Based on the survey, they learn the following: • Jo Wadley and David Collier (Cloud 9's CFO) both serve on the board of directors of the local chapter of Special Olympics. • A tax senior in another office has a sister that consults with Cloud 9 on shoe design. Cloud 9 is her largest client. Fifteen employees of W&S Partners, ranging from partners to entry-level staff, own shares in retailers that sell Cloud 9 shoes. • A survey shows that 23% of professional staff working for W&S Partners have purchased Cloud 9 shoes in the past. Required Evaluate each of the items above and their impact on the independence of W&S Partners with respect to Cloud 9. If relevant, list any additional actions you might take before making your independence recommendation to Jo Wadley.

Answer 1

Refer the below images for the above asked questions in a detailed way of explanation.
Solution: the might Following have a is the potential evaluation impact of on each of independence items that for cloud 9. Issue 1. Jo wadley and David Collier (cloud 9's CFO) both serve on the board of directors of the local chapter of Special Olympics. Evaluation There may be a familiarity threat because Jo wadley and David Collier serve together on the same board However, the familiarity threat can be addressed by independent review of the engagement by the firm's engagement quality control reviewer to determine that the audit team used an appropriate professional Skepticism . is not impaired by this Independente relationship. 2. a tox senior in another/ The sister who consults with cloud 9 6 office has a sister is a close relative of a member of who consults with cloud 9 W is partners. However, the tax on shoe design . senior is not likely a covered member. cloud 9 is her biggest client- Forther, the rules related to close relatives say that the relative Should I not hold a key position with Cloud 9. A consultant on Shoe design would not be a key position Independence is not impaired,

Evaluation Issue 3. Fifteen employees of Wis partners, ranging from partners to entry level Staff, own Shares in retailers that sell cloud a shoes and apparel while is employees own Stock in retailers who sell cloud a Shoes and apparel, they do not own stock in cloud a. Independence is not impaired. 4. A survey shows that 23% of professional staff working for w ys partners have purchased cloud 9 shoes in the past. The fact that employees purchase cloud 9 Shoes does not impair independence. Generally purchasing a client's products does not impair independence.