Solutions for Midterm Exam 1

Solutions for Midterm Exam 1 - “C” applies to all...

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Solutions for Midterm Exam 1 (with selected explanations) Note: The first number given is the number of the question on Version A, the second Version B. For example, “1/23” means the first question on Version A and the 23 rd question on Version B. 1/23 C 2/24 B 3/25 C 4/1 A 5/2 D 6/3 C “D” was also attractive to many students, requiring that each of the three situations create an independence problem under the rules and guidelines discussed in class (Ch. 3 slides). “A” likely isn’t problematic, as this executive doesn’t have significant financial reporting responsibilities. “B” is also OK, as the advice is consistent with prior IRS rulings and should meet the “more likely than not to be upheld” standard. “C” is an impermissible contingent fee. 7/4 C “A” was selected by a number of students. However, as emphasized in class (Ch. 3 slides), covered members are precluded from having only material indirect interests in an audit client.
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Unformatted text preview: “C” applies to all members of a firm, including covered members. 8/5 D 9/6 A 10/7 D 11/8 A “E” was also a popular choice. However, as noted in class (Ch. 1 and 2 slides and referenced Exhibit 1.2), the reference is now to PCAOB auditing standards, not GAAS, in public company audit reports. Thus, “A” is correct. 12/9 D 13/10 D 14/11 C 15/12 D “E” was also chosen by many students. In class (Ch. 2 slides), we discussed audit committee responsibilities. The referenced Exhibit 2.3 makes clear that it oversees financial reporting in addition to the internal and external audit functions. 16/13 B 17/14 C 18/15 D 19/16 E “D” was also frequently selected. However, you are a covered member by virtue of being a partner in the same office as the lead partner (Ch. 3 discussion). That, in and of itself, doesn’t create an independence problem. 20/17 C 21/18 B 22/19 D 23/20 B 24/21 A 25/22 C...
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This note was uploaded on 09/26/2011 for the course ACC 358c taught by Professor Staff during the Spring '08 term at University of Texas.

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Solutions for Midterm Exam 1 - “C” applies to all...

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