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Audit Clinic: family relationships

The questions about auditor independence keep on coming. This time John focuses on some very tricky problems with family relationships.

Is it acceptable to audit a company where one of my partner’s sisters is a director and the majority shareholder?John Selwood's Audit Clinic

It is important that you read the whole of my answer. No skimming! You may also find it helpful to have the Financial Reporting Council’s (FRC) Revised Ethical Standard 2016 (ES) and accompanying documents on hand while reading my answer (see below), as I make a number of references to the standard and glossary.