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Background and related standards
According to this case, BTI became a public listed company in 1999, section 100 (general application of the code) and section 200 (members in public practice) of “code of ethics for professional accountants” should be considered during the analysis.
1. Three threats and safeguards
a) Based on these principles and the situations in BTI case, there are three main threats that AWC and Angela Metz have to face. They are self-interest threats, self-review threats and familiarity threats.
Self-interest threats:
Section 200.4 of the APES 110 states that a self-interest threat is created when “concern about the possibility of losing a client, or having a close relationship with a client”. That is, where the relationship between client and auditor firm does affect the independence of the auditor.
In BTI case, the auditor firm AWC and Angela Mets have to face this threats. There are two issues worried Angela. On one hand, the BTI Company is the main client for AWC in Toowoomba. Meanwhile, in early 2005, AWC have a plan to set an office in Toowoomba. On the other hand, there is a potential competitive from another company, which named Tanner, Lidiak & Co. This auditor firm has good reputation in this area and also worked on the high-tech industry. In addition, some directors of BTI have close relationship with this competitor.
Self- review threats:
According to section 200.5 of the code, some situations create self-review threats for a member in practice, such as, “reporting on the operation of financial systems after being involved in their design or implementation”, “performing a service for a client that directly affects the subject matter ...