a.
Introduction: Auditing means the inspection of financial accounts of the company to determine if the records are accurate as per the rules and regulations of accounting or not. There are two types of auditors, i.e., internal auditors and external auditors, that carry out the
To Explain: Contingent fee.
b.
Introduction: Auditing means the inspection of financial accounts of the company to determine if the records are accurate as per the rules and regulations of accounting or not. There are two types of auditors, i.e., internal auditors and external auditors, that carry out the auditing process.
To state: The reason why contingent fees is not acceptable by the external auditors.
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Auditing: A Risk Based-Approach to Conducting a Quality Audit
- What are ‘free-riders’? How can a system ensure that those who benefit most from an accounting standard requiring certain disclosures also bear the greatest costs of it?arrow_forwardWhere would an auditor find the proper authorization that indicates it is okay to pay a vendor?arrow_forwardIs a member of an audit team required to disclose to a client that a commission will be received at the time the referral is being made under the “Commissions and Referral Fees Rule”? Yes or Noarrow_forward
- When auditors wish to issue an unmodified opinion but highlight that the entity changedits method of accounting for software development costs, they would most appropriatelyidentify the change in accounting method in which of the following?a. The introductory paragraph.b. The opinion paragraph.c. An emphasis-of-matter paragraph.d. An other-matter paragraph.arrow_forwarda. Why do you think it is so difficult to find an actual report?b. If you found an auditor’s report, were any deficiencies noted? If so, what were they?c. Why would a service organization publicize the results of its auditor’s report?arrow_forwardWhich non-audit service is permitted for an SEC audit client? Preparing a point-in-time gap analysis on its technology controls compared to industry standards. Providing a technology service that records accounting entries for the client. Loaning staff to prepare the client’s tax return. Loaning staff to assist with the client’s internal audit function.arrow_forward
- The AICPA removed its general prohibition of CPAs taking commissions and contingentfees becausea. CPAs prefer more price competition to less.b. Commissions and contingent fees enhance audit independence.c. Nothing is inherently wrong about the form of fees charged to nonaudit clients.d. Objectivity is not always necessary in accounting and auditing servicesarrow_forwardExplain the auditor’s responsibility to consider compliance with laws and regulations. How does this responsibility differ for laws and regulations that have a direct effect on the financial statements compared to other laws and regulations that do not have a direct effect?arrow_forwardThe preliminary judgement about materiality is the ______________ amount by which the auditor believes the statements could be misstated and still not affect the economic decisions of users. The missing word in this sentence is: a. Average b. Minimum c. Maximum d. Medianarrow_forward
- Under which of the following circumstances may member May charge a client a contingent fee? Group of answer choices a. May audits ABC Co. and wishes to charge it a contingent fee for the audit work. b. May audits ABC Co. and wishes to charge it a contingent fee for separate consulting work. c. May is examining prospective financial information for XYZ Co. and wishes to charge it a contingent fee for unrelated consulting services. d. May prepares TUV Co.’s tax returns and wishes to charge it a contingent fee for nontax consulting services.arrow_forwardWhat possible actions would an auditor might take if a client’s financial statements depart from GAAP. Would the demand for assurance services increase or decrease in the future?arrow_forward4.Which of the following define lowballing:Single choice. Offering the client a low fee in the hope that they will tell others and increase the auditors client base. Offering the audit at an artificially high fee to ensure that a good margin is made on the fee Offering the audit an artificially low fee in order to get the work before increasing fees later or offering other services to the client. Offering the client tax services only.arrow_forward
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