Exam 10: Independence and Moral Seduction

A CPA firm billed for audit services performed for a client more than one year ago. The client has paid a portion of the fees outstanding, but it has not been able to pay the remaining balance due to cash flow problems. The CPA firm has verified that the cash flow problems are authentic and expects the client to be able to pay the remainder of the bill, but the CPA firm cannot reasonably estimate the timing of such payments. As a result, the CPA firm:

The advocacy threat to independence exists when:

A paid tax return preparer is allowed to have:

A CPA does not own any stock in an audit client. However, the CPA's great-uncle, who lives in Finland, does own stock in this client. a. Does the uncle's stock holding impair the CPA's independence? b. The CPA knows that he is the sole beneficiary of this uncle's will and the uncle is 97-years-old. Is the CPA's independence impaired? c. The CPA just learned that his uncle died. Is the CPA's independence impaired?

To preserve their independence regarding audit clients, CPAs should not:

The adverse interest threat exists when:

A CPA firm is comprised of 100 audit partners. Three of these partners own stock in one of the CPA firm's audit clients, with each such partner owning 2% of the outstanding shares in this client. Does this CPA firm retain the independence to audit this client?

A hearing of the State Commission on Workplace Administration was convened to determine if the CFO of a corporation had engaged in "quid pro quo" sexual harassment. A part of that hearing, an external auditor who observed various incidents while auditing this corporation testified voluntary about his observations. This testimony created:

A CPA firm has an office in New York and an office in San Francisco. The CPA firm's New York office has been retained to audit the financial statements of a new bank client based in New York. The bank is a very large provider of consumer loans. As a result, numerous professionals who work at the CPA firm have outstanding loan and credit card balances owed to this bank. Which of the following loans potentially will impair the CPA firm's independence to audit this bank?

What are some of the safeguards that CPAs firm utilize to minimize threats to their auditor independence?

A CPA firm has multiple locations in Europe, Asia, and North America. The principal partner overseeing the audit is located in Dallas, Texas. Are all partners who commute to offices in Dallas, Texas considered to be covered members?

If a CPA prepares a few sales invoices on behalf of an audit client without charge because the client does not want to have to pay overtime to the workers who normally perform this task, the CPA's independence is:

In applying independence rules, the concept of a "covered member" on an audit applies to:

In accordance with the Independence Rule, an ownership interest in an audit client is considered to be an indirect interest if:

According to the AICPA's Code of Professional Conduct, if a CPA renders more than ten hours of nonaudit services to an audit client, the CPA :

Can a tax partner in a CPA firm with multiple offices be a "covered member" on an audit?