Victoria Lilly is a practicing CPA. A long-time audit client has asked Lilly to design and implement a computer-based accounting information system. The fees associated with this opportunity are very attractive. However, Victoria is concerned that she will not be able to maintain objectivity in future financial statement audits if she was responsible for the design and implementation of the client's accounting system. Furthermore, Victoria knows that professional standards require her to remain independent in "fact" and "appearance" from her auditing clients.1. In regards to financial statement audits, what is the difference between independence in "fact" and independence in "appearance"?2. Why do professional standards require that an auditor remain independent of their audit clients?3. Do you believe that Victoria can accept the engagement to develop the client's accounting system and still remain independent? (Support your answer)
Victoria Lilly is a practicing CPA. A long-time audit client has asked Lilly to design and implement a computer-based accounting information system. The fees associated with this opportunity are very attractive. However, Victoria is concerned that she will not be able to maintain objectivity in future financial statement audits if she was responsible for the design and implementation of the client's accounting system. Furthermore, Victoria knows that professional standards require her to remain independent in "fact" and "appearance" from her auditing clients.
1. In regards to financial statement audits, what is the difference between independence in "fact" and independence in "appearance"?
2. Why do professional standards require that an auditor remain independent of their audit clients?
3. Do you believe that Victoria can accept the engagement to develop the client's accounting system and still remain independent? (Support your answer)
1. Difference between independence in "fact" and independence in "appearance".
The independence in fact means the auditor is able to maintain the balanced attitude or objective point of view on the client throughout the audit process. Independence in appearance means the avoidance of significant facts and circumstances so that a third party viewing the relationship believes that the auditor is independent of the client
2. Explain why professional standards require an auditor to remain independent of their audit clients.
When the auditors become dependent on the client, quality of the auditing gets affected. The independence in appearance also gets affected and the third party may feel that the auditing is under the influence of the client ...
Business
Accounting
Related Accounting Q&A
Find answers to questions asked by student like you
Show more Q&A addQ: Question is pinned below
A: b) Journalize the entries using the perpetual inventory system:
Q: What is the maximum investment income a taxpayer is allowed to have and still be allowed to claim th...
A: Investment income cannot be more than $3,500 for the 2018 tax year to claim the earned income credit...
Q: Cash Budget
A: Monthly cash budget is as follows:
Q: for which funds are budgetary comparison schedules or statements required? should the actual revenue...
A: Financial accounting standards board (FASB):This is the organization which creates, develops, and ap...
Q: Dividing Partnership IncomeTyler Hawes and Piper Albright formed a partnership, investing $116,000 a...
A: The division of net income between the partners are as follows:
Q: Problem 9-97BEntries for and Financial Statement Presentation of a Note Griddley Company borrowed $2...
A: Click to see the answer
Q: Issuance of Long-Term Debt Anne Corp. issued $366,000, 5% bonds. Required: Provide the necessary jou...
A: Click to see the answer
Q: how do you calculate the net income
A: Revenues: Revenues are earnings from operations of a business. The operating activities are sale of ...
Q: Calculation and Journal Entry for Employer Payroll Taxes 1. Calculate the employer's payroll taxes ...
A: Employer payroll tax expense:
