Question 1

You are a Manager in the audit firm called Ali & Son Associates and this is your first time you
have worked on one of the firmÄs established clients, Maharibiko Co. The main activity of
Maharibiko Co. is providing investment advice to individuals regarding savings for retirement,
purchase of shares and securities and investing in tax efficient savings schemes. Maharibiko is
regulated by the relevant financial services authority.
You have been asked to start the audit planning for Maharibiko Co. by Mr. Salim, a partner in
Ali & Son Associates: Mr. Salim has been the engagement partner for Maharibiko Co. for the
previous nine years and therefore has excellent knowledge of the client. Mr. Salim has informed
you that he would like his daughter Zaidu to be part of this yearÄs audit team. Zaidu is currently
studying for her first sitting of the foundation papers for her CPA (T) qualification. Mr. Salim
also informs you that Mr. Fahd, the audit senior, received investment advice from Maharibiko
Co. during the year and intends to do the same next year.
In an initial meeting with the finance director of Maharibiko Co, you learned that this year, the
audit team will not be entertained on Maharibiko CoÄs yatch as used to be in previous years as
this could appear to be an attempt to influence the opinion of the audit. Instead, he has arranged a
balloon flight costing less than one-tenth of the expense of using the yatch and hopes this will be
acceptable. The director also states that the fee for taxation services this year should base on a
percentage of tax saved and trusts that your firm will accept a fixed fee for representing
Maharibiko Co. in a dispute regarding the amount of sales tax payable to the taxation authorities.
REQUIRED:
Explain the ethical threats which may affect the auditor of Maharibiko Co. and for each ethical
threat, discuss how the effect of the threat can be mitigated.

Question 2
Dibal Associate, an audit and assurance firm, has been engaged as auditors for the M & B Bank
Ltd, a public limited liability Company for some time now. M & B Bank has sixty branches
throughout the country including branches in Dodoma, Mwanza, Tanga and Zanzibar. The Bank
is one of the banks in the country which can boast of large landed properties. Dibal Associate
receives about 20% of its income from this particular client. Before last year’s audit, the bank
engaged the audit firm to value its land and buildings in all its branches and headquarters. This
work was executed by the audit firm and a report has been issued to management. The report has
been incorporated in this year’s financial statements to be audited in the near future. Dibal
Associate. see M & B Bank Ltd. as a very important client whose works are always executed
with dispatch
REQUIRED: Identify and evaluate any two significant threats as per the Code of Ethics for
Professional Accountants raised in the case and recommend the safeguards to either eliminate or
reduce the threats to an acceptable level.
Question 3
Compliance with fundamental principles of professional ethics may potentially be threatened by
a wide range of different circumstances.
REQUIRED: State any five (5) ethical threats and for each threat give one example of a
circumstance that may create the threat.

Question 4
Assume you are the audit manager of Island Associate Auditors and you are planning to audit
MAM Plc, a listed Company at Dar es Salaam Stock Exchange and which has been your audit
client for four years. MAM specializes in manufacturing luxury mobile phones.

During the planning stage of the audit you have obtained the following information: The
employees of MAM Plc are entitled to purchase mobile phones at a discount of 10%. The audit
team has in previous years been offered the same level of staff discount. During the year, the
financial controller of MAM was ill and hence unable to work. The Company had no appropriate
staff to perform his duties. Hence, a qualified audit senior from Island Associate Auditors was
seconded to the client for three months.

The audit partner has recommended that the audit senior to be included in the team to audit
MAM Plc as he has good knowledge of the client. The fee income derived from MAM was
boosted by this engagement of seconding the audit senior to MAM to 16% of the firm’s total
fees. From a review of the correspondence files, you have noted that the audit partner of Island
Associate Auditors and the finance director of MAM have known each other for many years and
in fact went on holiday together last summer with their families. As a result of this friendship the
partner has not yet spoken to the client about the fee for last year’s audit, 20% of which is still
outstanding.
REQUIRED:
Explain the specific ethical threats which may affect the independence of Island Associate
Auditors during the audit of MAM Plc, and for each threat explain how it might be avoided.

Question 5
Mr. Joseph is incharge of the quality control department of an audit firm. While reviewing the
working papers relating to some audit engagements of the firm, he came across the following
situations:
1. The spouse of a partner in the firm is a legal consultant and is assisting one of the firm’s
audit clients in filing its tax returns.
2. The audit manager engaged on the audit of a company has been offered a job by that
company. He has been asked to join on 1st September 2021 when the current CFO of the
company would retire. The audit is expected to be completed in 30th June 2021.
3. A meeting of the CEO of Mapambo and Company Limited and the audit engagement
partner was held to discuss the draft financial statements of the company for the year
 ended 30th September 2020. Serious differences emerged between the two sides on the
accounting treatment and the disclosures of certain items and consequently the CEO
informed the engagement partner that unless the auditors agree to the company’s point of
view, they would not be reappointed for the next year audit.
4. The engagement partner on the audit of Furaha Limited has been an engagement partner
of Furaha for the past six years.
REQUIRED: Identify the threats involved in each of the situations described above and
explain how it would affect the objectivity and independence of the auditor.

Question 6
You are a Senior Auditor in Kifaa Associates and you have been assigned to audit financial
statements of Mawingu Ltd, which specialized in the provision of Boiler spares to breweries
and individuals. Kifaa Associates has audited Mawingu Ltd for the past eight (8) years.

The following issues have arisen in the connection with the audit of the financial statements
for Mawingu Ltd for the year ended 28th February 2018.
1. Last year, the engagement audit team members attended a traditional ceremony in one of
the regions in the United Republic of Tanzania and all expenses were paid for by
Mawingu Ltd.
2. The wife of the Engagement Partner recently joined Mawingu Ltd as Finance Director.
3. The firm has continued to audit Mawingu Ltd mainly because the audit fee quoted are
significantly lower than those charged by competitors.
4. Mawingu Ltd has also requested Kifaa Associates to prepare all outstanding tax returns to
enable the company qualify for tax amnesty.
5. During the year, Kifaa Associates provided Information Technology (IT) services to
Mawingu Ltd in the implementation of an ‘off the shelf account package’.
6. Last year’s audit fees are still outstanding.
7. The Finance Director has informed you that the previous audit team should not be
changed.
8. Mawingu Ltd intends to give an interest-free loan to one of the engagement team
members to assist him with the preparations for his wedding.
REQUIRED:
(i) Explain five (5) ethical threats which may affect the independence of Kifaa Associates’
audit of Mawingu Ltd as per scenario above.
(ii) For each threat, suggest an appropriate safeguard