Required：

　　(a) Explain why ‘auditor independence’ is necessary in auditor-client relationships and describe THREE threats to auditor independence in the case. (9 marks)

　　(b) Anne is experiencing some tension due to the conflict between her duties and responsibilities as an employee of Fillmore Pierce and as a qualified professional accountant.

　　Required：

　　(i) Compare and contrast her duties and responsibilities in the two roles of employee and professional accountant. (6 marks)

　　(ii) Explain the ethical tensions between these roles that Anne is now experiencing. (4 marks)

　　(c) Explain how absolutist (dogmatic) and relativist (pragmatic) ethical assumptions would affect the outcome of Anne’s decision. (6 marks)

　　(25 marks)

　　Question：Which of the following are potential benefits of risk management for a company?

　　A. Lower insurance costs

　　B. Elimination of residual risk

　　C. Cash flow predictability

　　D. Limitation of possibility of bankruptcy

　　E. Increased confidence of shareholders

　　The correct answers are: Cash flow predictability; Limitation of possibility of bankruptcy; Increased confidence of shareholders; Lower insurance costs.

　　解析：Risk management should reduce the risks that can result in unexpected cash flows or ultimately bankruptcy. As a result shareholders should be happier with the company.

　　Lower insurance costs could possibly be a benefit in accordance with the terms of the question, if insurance companies reduce premiums because they are happy with the risk management steps that the company is taking. However if the company chooses to manage its risks by significant use of insurance, premiums may also increase.

　　Residual risk is the risk that remains with the company after normal steps have been taken to manage other risks. It is unlikely to be eliminated as companies generally do not operate in a risk free environment.