Auditing and Assurance Services

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b. The client has the right to use his time as he sees fit, but also has the right to a properly performed audit. Financial statement users have the right to know about any control problems, or to have the problems identified and corrected. c. It’s not fair for the auditor to deceive those who read the auditor’s report by failing to properly investigate the exception. It’s also not fair for the in-charge senior to ask the auditor to give up his integrity by not looking into the exception. 2. Student answers will vary, depending on their individual viewpoint. Internet Assignments 19-37 a. Independence would not be impaired as long as the member did not serve as an officer, director, or in any management capacity. This relates indirectly to Rule 101 Interpretation 101-1. However, the question is specifically addressed in ET 191.004. b. Independence would not be impaired if, as indicated in the problem, the member’s role is strictly advisory in nature. If any of the activities listed were to cross the line to constitute performance of management activities, independence would be impaired whether or not the company was a private or a public entity. (Rule 101 Interpretation 101-3). The question is specifically addressed in ET 191.015. c. Independence is impaired because the member is performing a management function. This is covered by Rule 101, Interpretation 101-1.C.1, and the question is specifically addressed in ET 191.017. d. The designation by itself would not impair independence, but if a member served in such a capacity then independence would be considered impaired. The member would have to refuse to serve in order to maintain his or her independence. (Rule 101, Interpretation 101-1.A.2). The question is specifically addressed in ET 191.021. e. Independence would be considered to be impaired if any partner or professional employee of the firm served as a director or officer of the organization and the organization exercised managerial control over the local charities. If the member believes that professional service can be performed objectively and the service is disclosed to and consent is obtained from the involved parties, then the service would be allowed. Otherwise independence is impaired. (ET 191.028 and Interpretation 101-1). 19-11
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Chapter 19 - Professional Conduct, Independence, and Quality Control 19-12
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Chapter 19 - Professional Conduct, Independence, and Quality Control f. If fees pertaining to services provided more than one year prior to the date of the audit report remain unpaid, the auditor’s independence is impaired with respect to that client. However, unpaid fees from a client that is in bankruptcy do not impair the auditor’s independence. This question is answered in ET 191.104. Rule 101, Interpretation 101-1.A.1. Because this constitutes a financial interest in the client (it is basically a loan) it also relates to Interpretation 101-5. 19-13
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