Problem
Ross Duncan is the controlling shareholder of Classy Diamonds (market value of issued capital worth $70 million). Classy Diamonds specialises in high-quality diamond jewellery which is exclusive and used by some of Australia's most famous celebrities. In November 2020, Ross became very concerned about the auditors of Classy Diamonds and offered Jim Edwards, a registered auditor, the appointment of the auditor for Classy Diamonds. Ross has a long association with Jim as Jim is a loyal customer of Classy Diamonds. Jim's wife also purchases various items of jewellery from Classy Diamonds on a regular basis and has a VIP account with Classy Diamonds which provides her with product discounts. Jim agrees and accepts the audit of Classy Diamonds for the year ending 31st December 2020.
I. Jim is an experienced auditor with over 20 years of involvement in the audit environment but has limited experience in the jewellery/precious stones industry. He has undertaken audits of manufacturing entities in the past. Jim has recently hired three graduates to work in his firm. The graduates have no previous audit experience but will assist Jim in the audit of Classy Diamonds. One of the graduates, Sharon, has worked part-time as a sales assistant every summer for Classy Diamonds for the last 5 years and will provide significant assistance to Jim in the planning of the audit of Classy Diamonds.
II. Jim has a superannuation fund that holds approximately $490,000 in accumulated funds. One of the investments held in the superannuation fund includes shares in Classy Diamonds. The shares in Classy Diamonds are one of 40 different companies that the investment fund has invested in.
III. Jim's wife is celebrating her birthday on the 26th of January and in mid-October 2020, Jim had arranged for an exclusively picked diamond (worth $9,000) to be imported into Australia by Classy Diamonds to be set in a pendant (worth $3,000) so that Jim can give a gift the pendant for his wife's birthday. Employees of Classy Diamonds (both full-time and casual) are given a 5% employee discount and Sharon (the graduate helping Jim in the current audit) has offered to purchase the pendant on his behalf so Jim can receive the discount.
Task
For each of the parts above, critically evaluate the information provided and discuss whether the issues identified in (I) - (III) represent potential ethical issues as per APES110.