Scribd Logo
Upload

Welcome to Scribd!

  • 19 views

    CH 4 Independence Questions

    Uploaded by

    Hayam Amr
    The document discusses the definition of independence in auditing. It provides multiple choice questions that test understanding of independence rules. Independence means not being financially dependent on a client. The Sarbanes-Oxley Act prohibits a CPA firm from doing both bookkeeping and auditing services for the same public company client. Independence is required for audits of financial statements and all attestation services. Some conditions allow CPAs to provide bookkeeping services to private company audit clients while maintaining independence. Examples of indirect financial interests in a client include ownership of client stock by a covered member's spouse or a mutual fund with client investments. Two scenarios presented could violate independence rules based on financial interests or unpaid fees creating dependence.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    CH 4 Independence Questions

    Uploaded by

    Hayam Amr
    19 views3 pages
    The document discusses the definition of independence in auditing. It provides multiple choice questions that test understanding of independence rules. Independence means not being financially dependent on a client. The Sarbanes-Oxley Act prohibits a CPA firm from doing both bookkeeping and auditing services for the same public company client. Independence is required for audits of financial statements and all attestation services. Some conditions allow CPAs to provide bookkeeping services to private company audit clients while maintaining independence. Examples of indirect financial interests in a client include ownership of client stock by a covered member's spouse or a mutual fund with client investments. Two scenarios presented could violate independence rules based on financial interests or unpaid fees creating dependence.

    Original Title

    Ch-4-Independence-Questions

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document discusses the definition of independence in auditing. It provides multiple choice questions that test understanding of independence rules. Independence means not being financially dependent on a client. The Sarbanes-Oxley Act prohibits a CPA firm from doing both bookkeeping and auditing services for the same public company client. Independence is required for audits of financial statements and all attestation services. Some conditions allow CPAs to provide bookkeeping services to private company audit clients while maintaining independence. Examples of indirect financial interests in a client include ownership of client stock by a covered member's spouse or a mutual fund with client investments. Two scenarios presented could violate independence rules based on financial interests or unpaid fees creating dependence.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    19 views3 pages

    CH 4 Independence Questions

    Uploaded by

    Hayam Amr
    The document discusses the definition of independence in auditing. It provides multiple choice questions that test understanding of independence rules. Independence means not being financially dependent on a client. The Sarbanes-Oxley Act prohibits a CPA firm from doing both bookkeeping and auditing services for the same public company client. Independence is required for audits of financial statements and all attestation services. Some conditions allow CPAs to provide bookkeeping services to private company audit clients while maintaining independence. Examples of indirect financial interests in a client include ownership of client stock by a covered member's spouse or a mutual fund with client investments. Two scenarios presented could violate independence rules based on financial interests or unpaid fees creating dependence.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    Ch 4 Independence Questions

    1- Briefly discuss the definition of independence rule.

    MCQ:

    1) "Independence" in auditing means

    A) maintaining an indirect financial interest.

    B) not being financially dependent on a client.

    C) taking an unbiased viewpoint.

    D) being an advocate for a client.

    2) The Sarbanes-Oxley Act ________ a CPA firm from doing bothbookkeeping and auditing services for
    the same public company client.

    A) encourages

    B) prohibits

    C) allows

    D) allows on a case-by-case basis

    3) For which of the following professional services must CPAs beindependent?

    A) management advisory services

    B) audits of financial statements

    C) preparation of tax returns

    D) all of the above


    4) Independence is required of a CPA when performing

    A) management advisory services.

    B) all attestation services.

    C) all attestation and tax services.

    D) all professional services.

    5) CPAs may provide bookkeeping services to their private company audit clients, but there are a number
    of conditions that must be met if the auditor is to maintain independence. Which of the following
    conditions is not necessary?

    A) The CPA must not assume a management role or function.

    B) The client must hire an external CPA to approve all the journal entries prepared by the auditor.

    C) The auditor must comply with GAAS when auditing work prepared by his/her firm.

    D) The client must accept responsibility for the financial statements.

    6) An example of an "indirect financial interest in a client" would be

    A) ownership of less than 10% of the client's stock by the covered

    members spouse.

    B) an ownership of less than 10% of the client's stock by a staff member who is not involved in the audit.

    C) the covered member's ownership of a mutual fund that has an investment in the client.

    D) All of the above are examples of an indirect financial interest in a client.


    7) Each of the following situations involves a possible violation of the rule on independence. For each
    situation, (1) decide whether the Code of Professional Conduct has been violated, and (2) briefly explain
    how the situation violates (or does not violate) the Code of Professional Conduct.

    a. John Woods is an audit manager with Calden & Co., CPAs, a one office CPA firm. John owns 100 shares
    of common stock in one of the firm's audit clients, but he does not provide any audit or non-audit

    services to the company.

    b. Hamilton Appliance has not paid Karen Linwood, CPA, her audit fee for the past two years. Karen is
    starting work on the current year's audit of Hamilton.

    You might also like