Auditing and Assurance Services (16th Edition)
16th Edition
ISBN: 9780134065823
Author: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan
Publisher: PEARSON
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Question
Chapter 4, Problem 26DQP
a.
To determine
State the reason for which independence is essential for auditors.
b.
To determine
Compare the significance of independence of CPA’s with that of other professionals such as attorneys.
c.
To determine
Explain the difference between independence of CPA’s with that of other professionals such as attorneys.
d.1
To determine
Identify whether the partner has violated the AICPA code of professional conduct.
d.2
To determine
State whether the ownership is probable to affect the partners’ independence of mind.
d.3
To determine
State the reason for which the strict requirements about stock ownership in the rules of conduct.
e.
To determine
Explain the manner in which the situations given affect the independence of mind and independence in appearance and evaluate the social consequence of prohibiting auditors.
f.
To determine
State the reason for which the strict requirements about stock ownership in the rules of conduct.
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Students have asked these similar questions
Discuss how each of the following could affect independence of mind and independence in appearance, and evaluate the social consequence of prohibiting auditors from doing each one:
Owning stock in a client company.
Having bookkeeping services for an audit client performed by the same person who does the audit.
Having a spouse who is the chief financial officer of a client company.
(More detail)
1. Which of the following statements is true? The CPA firm will lose its independence if:
A. a staff auditor providing audit services to the client acquires stock in that client.
B. a staff tax preparer who provides 15 hours of non-audit services to the client acquires
stock in that client.
C. an audit manager in an office different than the office providing audit services has a
direct, immaterial financial interest in the audit client.
D. an audit partner has an indirect, immaterial financial interest in an audit client that he
is not in charge of.
2. The correct sequence of the paragraphs in the audit report should be:
A. Basis of opinion – Explanatory paragraph – Opinion.
B. Opinion - Basis of opinion – Explanatory paragraph.
C. Opinion - Explanatory paragraph – Basis of opinion.
D. Basis of opinion – Opinion – Explanatory paragraph.
3. The underlying reason for a code of professional ethics for auditing profession is:
A. the need for public confidence in the quality of service of…
Which choice is the best example of an independent auditor?
A. CPA who has a significant investment in the company being audited.
B. A CPA who currently performs payroll services at the company it's auditing
C. A CPA who is the best friend of upper financial management at the company being audited.
D. None of these are independent auditors.
Chapter 4 Solutions
Auditing and Assurance Services (16th Edition)
Ch. 4 - Prob. 1RQCh. 4 - Describe an ethical dilemma. How does a person...Ch. 4 - Prob. 3RQCh. 4 - Prob. 4RQCh. 4 - Prob. 5RQCh. 4 - Prob. 6RQCh. 4 - Prob. 7RQCh. 4 - Prob. 8RQCh. 4 - Prob. 9RQCh. 4 - Prob. 10RQ
Ch. 4 - Assume that an auditor makes an agreement with a...Ch. 4 - Prob. 12RQCh. 4 - Prob. 13RQCh. 4 - Prob. 14RQCh. 4 - Prob. 15RQCh. 4 - Prob. 16RQCh. 4 - Prob. 17.1MCQCh. 4 - Prob. 17.2MCQCh. 4 - Prob. 17.3MCQCh. 4 - Prob. 18.1MCQCh. 4 - Prob. 18.2MCQCh. 4 - Prob. 18.3MCQCh. 4 - Prob. 19.1MCQCh. 4 - Prob. 19.2MCQCh. 4 - Prob. 19.3MCQCh. 4 - Prob. 20DQPCh. 4 - Prob. 21DQPCh. 4 - Prob. 22DQPCh. 4 - Prob. 23DQPCh. 4 - Prob. 24DQPCh. 4 - Prob. 25DQPCh. 4 - Prob. 26DQPCh. 4 - Prob. 27DQPCh. 4 - Prob. 28CCh. 4 - Prob. 29CCh. 4 - Prob. 30C
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Similar questions
- b) The IESBA Code of Ethics for Professional Accountants highlights a number of areas in which threats might arise to independence and objectivity. Required; i. Explain what is meant by an advocacy threat and give an example of a situation which may create an advocacy threat. ii. State the category of threat that arises from an inappropriately close business relationship with a client and give two examples of close business relationships that would cause such a threat. c) An audit is one type of assurance engagement, but practitioners may carry out other assurance engagements, such as review engagements. Required; Describe a review engagement and explain the level of assurance given in such an engagement. d) Explain the terms `accountancy', `stewardship' and `agency' and explain how they can be applied to the relationship between directors and shareholders.arrow_forward1: What problems do you see when an auditor relies extensively on management’s representations on the financial statements? 2: Do you believe that a CPA should be able to advertise? What guidelines would you recommend? Are there any areas you believe should be avoided?arrow_forwardChoose the correct.Which of the following is not a way by which the Sarbanes–Oxley Act attempts to ensure auditor independence from an audit client?a. The auditing firm must be appointed by the client’s audit committee.b. Audit fees must be approved by the Public Company Accounting Oversight Board.c. The audit committee must be composed of members of the client’s board of directors who are independent of the management.d. The external auditor cannot also perform financial information system design and implementation work.arrow_forward
- Mr. Bader is leaving his Auditing Firm to become the Finance Director of his client company. The ethical dilemma that he is most likely to face would be conflict in: a. Confidentiality b. Due Care c. Professional Competence d. Professional Behaviorarrow_forwardFor each situation below identify the threat and one fundamental principle that is comprised.a) An auditor has shares in a company which is an audit client of theirs.b) An accountant has compiled the financial statements for a client and was requested to also audit the statements.c) The financial director of Baboo Ltd is very aggressive and dismissive of the audit function and audit teamd) A chartered accountant values a client’s shares and then leads the negotiations on the sale of the client’s companye) The chartered accountant fails to report a fraud at a client because the perpetrator is a close friend and he issympathetic to the interest of his friend.arrow_forwardAuditors are important because they are able to provide assurance of an organization's financial statements from an objective and independent opinion. It benefits the company in several ways, such as maintaining consistency, finding errors in their processing, or detecting fraud. While performing work , the auditors may face situations when they will not be able to fulfill ethical requirements. Which threat may occur as a result of the financial or other interests of a professional accountant or of an immediate or close family member? Self-interest threats Familiarity threats Advocacy threats Self-review threatsarrow_forward
- Barbara Wells is a first-year auditor for a large public accounting firm. She was assigned to audit Larson Brothers; the CEO of Larson is her brother. She discussed some of her findings with family members. What is the relevant requirement (s) for the ethical behavior of an auditor? a. Qualified to carry out the scope of service b. Confidential c. All of those listed d. Independencearrow_forwardIn assessing whether to accept a client for an audit engagement, an auditor should consider the: Select one:a. Political consistency of the country. b. Auditor’s engagement risk.c. The social and cultural factors of society in which the business operates. d. None of the above.arrow_forwardSelect the necessary words from the list of possibilities to complete the following statements. Statements 1. The AICPA Code of Professional Conduct includes: Principles, Rules and Auditors must be independent of any enterprise and must also parties. 2. 3. A CPA's independence with respect to an enterprise will be impaired if the CPA has any or material indirect financial interest in the enterprise. In evaluating independence, financial interests of a CPA's 4. the CPA. 5. 6. 7. 8. 9. 10. independent to third are ascribed directly to CPAS in public practice should not accept a fee from an audit client that is specified finding. upon a Consulting services for audit clients should be advisory in nature, CPAS should not make decisions for these clients. Retaining a client's accounting records for nonpayment of fees is an act profession. The Accounting Principles Rule requires the CPA to recognize the pronouncements of the Financial Accounting Standards Board and the Government to the CPAS…arrow_forward
- Which of the following may not be the possible sources of obtaining information in respect of client's business for the purpose of preparation of an audit plan? O a. Minutes of directors and shareholders of entity's competitors O b. Discussion of audit matters with an internal auditor OC. Discussions with client's lawyers O d. Predecessor auditor's working papersarrow_forward16. True or False. Write true if the statement is correct, or false if the statement is incorrect. If true, explain why in one(1) or two(2) complete sentences, státement in at least one(1) complete sentence. The internal auditor is a company employee and a full-fledged CPA. b. The main objective of the independent auditor is to fulfill the needs of the general public for reliable financial statements. c. Independent auditing is also known as compliance auditing. d. Internal auditing is also known as operational auditing. BIR auditing is also known as compliance auditing. f. The internal auditor is directly concerned with the detection and prevention of fraud. g. The independent auditor is also directly concerned with the detection and prevention of fraud, just like the internal auditor. h. Independent auditing is a "broken" activity, unlike internal auditing which is done continuously. The internal auditor should be independent of the treasurer and chief accountant, but and if false,…arrow_forward
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