Considering the available options, the one that is not considered to be a threat to or potential conflict with the independence rule is:
" There is legal action between the member's firm and the client regarding audit services."
- This is because a legal action has no influence or threat on the performance of the auditor.
- However, option A is wrong because when a member sits on the board of directors that is a form of self-interest threat.
- Option B is wrong because when member takes out automobile loan through their client, that is a form of advocacy threat.
- Option D is also wrong because when a close relative has a key position with client, that is a form of Familiarity threat.
Hence, in this case, the correct answer is option C "There is legal action between the member's firm and the client regarding audit services."
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