Write answers to each of the two (2) situations described below addressing the required criteria (i.e. 1 & 2). You may use a tabulated format if helpful having “Threats”, “Safeguards” and “Objective Assessment” as column headings. The following situations involve Abraham Lincoln, an audit partner with the accounting firm of Joyce & Mark. He is involved with the audit of Dockland Ferries Ltd (Dockland). Dockland is one of the oldest companies listed on the Australian Securities Exchange.
1. Abraham Lincoln’s wife, Sarah Michaels, is planning to take a loan from Dockland which is material to Sarah Michaels and Dockland.
2. The assistant accountant of Dockland resigned 6 months ago and has not been replaced. As a result, Dockland’s transactions have not been recorded and the accounting records are not up to date. To comply with the terms of the loan agreement, Dockland needs to prepare interim financial statements but cannot do so until the records are up to date. The managing director of Dockland wants Abraham to help them out because he performed the audit last year. Abraham agrees to help out Dockland for 1 month before the start of the annual audit on which he will be involved again.