Wiley CPAexcel Exam Review 2014 Study Guide, Auditing and Attestation

Appendix B: Sample Auditing and Attestation Testlet Released by AICPA

1. According to the profession’s ethical standards, an auditor would be considered independent in which of the following instances?

a. The auditor is the officially appointed stock transfer agent of a client.

b. The auditor’s checking account that is fully insured by a federal agency is held at a client financial institution.

c. The client owes the auditor fees for more than two years prior to the issuance of the audit report.

d. The client is the only tenant in a commercial building owned by the auditor.

1. (b) The requirement is to identify the instance in which an auditor would be considered independent. Answer (b) is correct because per ET 191.140–.141 the auditor’s independence would not be impaired, provided the checking accounts, etc. are fully insured by an appropriate deposit insurance agency. Answer (a) is incorrect because per ET 191.077–.078 an auditor’s independence would be impaired since the function of a transfer agent is considered equivalent to that of a member of management. Answer (c) is incorrect because per ET 191.103–.104 an auditor’s independence is considered to be impaired if, when the report on the client’s current year is issued, fees remain unpaid, whether billed or unbilled, for professional services provided more than one year prior to the date of the report. Answer (d) is incorrect because per ET 191.58 leasing property to a client results in an indirect financial interest in that ...