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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.

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.

Auditing: A Risk Based-Approach to Conducting a Quality Audit
Auditing: A Risk Based-Approach to Conducting a Quality Audit
10th Edition
ISBN:9781305080577
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Chapter4: Professional Liability, Auditor Judgment Frameworks, And Professional Responsibilities
Section: Chapter Questions
Problem 24MCQ
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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 the profession. B. it provides a safeguard to keep unscrupulous people out. C. it is required by government legislation. D. it allows licensing agencies to have a yardstick to measure deficient behavior. 4. If a short-term note payable is included in the accounts payable balance on the financial statement, there is a violation of the: A. completeness assertion. B. existence assertion. C. cutoff assertion. D. classification assertion. 5. The new auditor request for information from the outgoing auditor. This: A. allows the auditor to understand the new client more. B. is a requirement before the auditor accepts the engagement and the auditor can contact the outgoing auditor without seeking approval of the client. C. will help the auditor determine whether to accept the client or not. D. is not necessary and the auditor can skip this procedure if he wishes. 6. The auditor determines that Star Company occupies the 3rd floor of an office tower for which it pays no rent. The most likely explanation is: A. they got lucky the landlord hasn't noticed the lack of payments. B. landlord has weak internal controls over billings. C. a related party transaction in which a major shareholder owns the office tower. D. Star Company is engaging in fraudulent activities.
Transcribed Image Text: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 the profession. B. it provides a safeguard to keep unscrupulous people out. C. it is required by government legislation. D. it allows licensing agencies to have a yardstick to measure deficient behavior. 4. If a short-term note payable is included in the accounts payable balance on the financial statement, there is a violation of the: A. completeness assertion. B. existence assertion. C. cutoff assertion. D. classification assertion. 5. The new auditor request for information from the outgoing auditor. This: A. allows the auditor to understand the new client more. B. is a requirement before the auditor accepts the engagement and the auditor can contact the outgoing auditor without seeking approval of the client. C. will help the auditor determine whether to accept the client or not. D. is not necessary and the auditor can skip this procedure if he wishes. 6. The auditor determines that Star Company occupies the 3rd floor of an office tower for which it pays no rent. The most likely explanation is: A. they got lucky the landlord hasn't noticed the lack of payments. B. landlord has weak internal controls over billings. C. a related party transaction in which a major shareholder owns the office tower. D. Star Company is engaging in fraudulent activities.
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