Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Question
Chapter 3, Problem 28QRA
To determine
Explain whether the threat can impair the independence of Mr. R.
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Roger Royce, CPA, has encountered a situation that he thinks may pose a threat to his independence with respect to Watson, Incorporated an audit client. The situation is not addressed by an independence rule or regulation. Using the AICPA Conceptual Framework for Independence Standards, describe how Royce can determine whether the threat truly impairs his independence.
AICPA independence requirements suggest that a CPA should evaluate whether a particular threat to independence would lead a reasonable person, aware of all the relevant facts, to conclude that:
a
A questioning mind reveals doubt as to independence.
b
An unacceptable risk of non-independence exists.
c
The accountant is definitely not independent.
d
There is substantial cause for a legal finding of non-independence.
Do you believe that the SEC should prohibit auditors from providing all nonaudit services for audit clients? Use ethical reasoning to support your answer.
Chapter 3 Solutions
Principles Of Auditing & Other Assurance Services
Ch. 3 - What is meant by the term ethical dilemma?...Ch. 3 - What are the two major types of constraints on...Ch. 3 - Prob. 3RQCh. 3 - Prob. 4RQCh. 3 - Prob. 5RQCh. 3 - Prob. 6RQCh. 3 - Prob. 7RQCh. 3 - Bill Scott works as a manager in the Phoenix...Ch. 3 - Prob. 9RQCh. 3 - Prob. 10RQ
Ch. 3 - Prob. 11RQCh. 3 - Prob. 12RQCh. 3 - Prob. 13RQCh. 3 - Prob. 14RQCh. 3 - Prob. 15RQCh. 3 - Prob. 16RQCh. 3 - Prob. 17RQCh. 3 - Prob. 18RQCh. 3 - Prob. 19RQCh. 3 - Prob. 20RQCh. 3 - Prob. 21RQCh. 3 - Prob. 22RQCh. 3 - Prob. 23RQCh. 3 - Prob. 24RQCh. 3 - Prob. 25RQCh. 3 - Prob. 26RQCh. 3 - Prob. 27QRACh. 3 - Prob. 28QRACh. 3 - Prob. 29QRACh. 3 - Prob. 30QRACh. 3 - Prob. 31QRACh. 3 - Prob. 32QRACh. 3 - Ron Barber, CPA, is auditing the financial...Ch. 3 - Prob. 34AOQCh. 3 - Prob. 34BOQCh. 3 - Prob. 34COQCh. 3 - Prob. 34DOQCh. 3 - Prob. 34EOQCh. 3 - Prob. 34FOQCh. 3 - Prob. 34GOQCh. 3 - Prob. 34HOQCh. 3 - Prob. 34IOQCh. 3 - Prob. 34JOQCh. 3 - Prob. 34KOQCh. 3 - Prob. 34LOQCh. 3 - Prob. 35OQCh. 3 - Prob. 36OQCh. 3 - Prob. 37OQCh. 3 - Prob. 38OQCh. 3 - Prob. 39OQCh. 3 - Prob. 40OQCh. 3 - Prob. 41OQCh. 3 - Prob. 42OQCh. 3 - Gary Watson, a graduating business student at a...Ch. 3 - Prob. 44PCh. 3 - Prob. 45PCh. 3 - Prob. 46PCh. 3 - Prob. 47PCh. 3 - Prob. 48PCh. 3 - Prob. 49ITCCh. 3 - Prob. 50ITCCh. 3 - Prob. 51RDC
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Similar questions
- Some criticize the accounting profession for using expressions in the audit report that seem to be building in deniability should the client commit a fraudulent act. What expressions enable the CPA to build a defense should the audit wind up in the courtroom? Do you see anything wrong with these expressions from an ethical point of view?arrow_forwardA CPA wishes to use representation letter as a substitute for performing other audit procedures. Doing so: Violates professional standards, Is acceptable, but should only be done when cost justified, Is acceptable, but only for non-public clients, Is acceptable and desirable under all conditionsarrow_forwardWhich of the following statements is true regarding the AICPA Code of Conduct's conceptual framework approach? An auditor who identifies threats should discontinue the engagement. Olf safeguards reduce threats to an acceptable level, the auditor should discontinue the engagement. OAfter threats are identified, an auditor should apply safeguards to determine whether the threat can be reduced to an acceptable level. OAn auditor who identifies threats that are significant should discontinue the engagement.arrow_forward
- Which of the following would be considered a self-interest threat? When a member of the assurance team was previously a director or officer of the assurance client Acting as the client’s advocate in a legal proceeding Potential employment with an assurance client A member of the assurance team has a close family member who is a director or officer of the assurance clientWhich of the following would be considered a self-interest threat? When a member of the assurance team was previously a director or officer of the assurance client Acting as the client’s advocate in a legal proceeding Potential employment with an assurance client A member of the assurance team has a close family member who is a director or officer of the assurance clientarrow_forwardWhat are some civil and criminal consequences if CPAs/auditors fail to follow professional standards?arrow_forwardWhich of the following actions would be considered as self-interest threats?Select which option is correct: a. An auditor has no potential employment with an assurance client. b. A member of the assurance team is a director of the client. c. An auditor acts as an advocate on behalf of an assurance client. d. One client provides a high percentage of total audit fees.arrow_forward
- For each of the situations described below, identify the category of threat to the fundamental principles of the SAICA Code of Professional Conduct. Additionally, specify at least one fundamental principle that is compromised in each situation. 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 team. d) A chartered accountant values a client's shares and then leads the negotiations on the sale of the client's company. e) The chartered accountant fails to report a fraud at a client because the perpetrator is a close friend and he is sympathetic to the interest of his friendarrow_forwardWhich of the following would be considered a self-interest threat? When a member of the assurance team was previously a director or officer of the assurance client Potential employment with an assurance client A member of the assurance team has a close family member who is a director or officer of the assurance client Acting as the client’s advocate in a legal proceedingarrow_forwardWhich of the following statements is correct regarding auditor independence in fact and in appearance? The auditor should be independent both in fact and in appearance. The auditor should be independent in fact but not in appearance. O The auditor should be independent in appearance but not in fact. When the auditor does not challenge an inappropriate journal entry made by the client in order to keep the client for future audits, this is an example of loss of independence in appearance.arrow_forward
- Do you think it would be ethical for a CPA to have someone else do for her that which she is prohibited from doing by the AICPA Code of Professional Conduct? Why or why not? Do you think a CPA can justify allowing the unethical behavior of a supervisor by claiming, “It’s not my job to police the behavior of others?”arrow_forwardADCB conducts regular internal investigations and audits to comply with regulatory requests. These internal audits are not that important. Is the statement True or False? Choose the correct option and select SUBMIT. False. True.arrow_forwardWhich of the following actions would be considered as self-interest threats? Select which two options are correct. Select one or more: A. A member of the assurance team is a director of the client. B. An auditor acts as an advocate on behalf of an assurance client. C. An auditor has potential employment with an assurance client. D. One client provides a high percentage of total audit fees.arrow_forward
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