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Ethical threat
Mr Son, the engagement partner has been involved with the client for the last nine years.
This means he may be too familiar with the client to be able to make objective decisions due to this long association.
There is no ethical rule which stops Mr Son recommending Zoe for the audit, or letting Zoe take part in the audit.

However, there may be the impression of lack of independence as Zoe is related to the engagement partner. Zoe could be tempted not to identify errors in case this prejudiced her father’s relationship with the client.
As long as Mr Far paid a full fee to Stark Co for the investment advice, then there is no ethical threat. This would be a normal commercial transaction and Mr Far would not gain any benefit.

However, continued use of client services could imply a lack of independence especially if Mr Far is not paying a full fee and therefore receiving a benefit from the client.

The audit team have been offered a balloon flight at the end of the audit.

Acceptance of gifts from a client, unless of an insignificant amount, is not allowed. The fact that the flight costs less than the yacht expense is irrelevant, independence could still be impaired.
Agreeing to accept taxation work on the percentage of the tax saved is essentially accepting a contingent fee.

There will be pressure to gain the highest tax refund for the client and this could tempt the audit firm to suggest illegal tax avoidance schemes.
Representing Stark Co in court could be seen as an advocacy threat – that is the audit firm is promoting the position of the client.

Objectivity could be compromised because the audit firm is seen to take the position that the client is correct, affecting judgement on the tax issue.

Mitigation of threat
Mr Son should be rotated from being engagement partner. He can still contact the client but should not be in the position of signing the audit report.
To show complete independence, Zoe should not be part of the audit team. However, if Mr Son is no longer the engagement partner then this removes the ethical threat and Zoe could be included in the audit team.
To show independence from the client, Mr Far could be asked not to use the services of Stark Co again unless this is first agreed with the engagement partner.
The balloon flight should not be accepted. Investigation would also be needed to find out why hospitality was accepted in previous years.
The audit firm must confirm that assistance with taxation work is acceptable, although the fee must be based on time and experience for the job, not the contingent fee.
To remain independent, the audit firm should decline to represent the client in court.