a.

familiarity threat is existed because the auditor just acquired 5% of the NorthCee (the company
that will be audited) share capital as an inheritance on the death of a distant relative. Hence, the
auditor might lack objectivity while doing the work as auditor. Moreover, since NorthCee have been
in relationship with the auditor company for a long time, the judgement of the auditor might be
affected. Hence, the auditor must put aside any feeling and subjectivity toward NorthCee and
maintain objectivity.

c. it is very important for the external auditor to communicate with the company. Because, by
communicating with the company that will be audited, they will be able to gain a better insight
about the company background and evaluate the information. Moreover, external auditor also
needs to develop a relationship with the company by communication, which will help them in
understand the matters relating to audit much better while maintaining the auditor independence
and objectivity. For example, the by communicating to a person with relevant role in NorthCee
company the auditor will gain some guidance to some matters such as the overall approach and
scope of audit, the accounting policies that the company use, any expected modifications to the
audit report, and so on.