a. What are the four guiding principles that have been developed by the SEC for auditor independence?

b. Are the principles applicable only to auditors of SEC companies, or do they apply to auditors of smaller, privately held companies as well?

c. The following are five situations in which auditors may find themselves. For each of the situations, indicate whether it appears to violate the SEC's independence principles. Explain your answer.

(1) Spencer is the partner in charge of the audit of Flip Company. He has half interest in a joint venture with Flip's CFO, but the joint venture is audited by a separate independent CPA firm.

(2) Victoria is the senior-in-charge of the audit of Holder Company. During the past year, she filled in for the chief accountant, who had emergency surgery and was out for six weeks.

(3) Brandon has been asked by an audit client to represent the client in negotiations with the management of another company

that the client wants to acquire.

(4) Sanders is the partner-in-charge of the audit of the Marshall Co. The CEO and CFO have asked Sanders to prepare their personal federal and state income tax returns as well as the tax

returns for the company.

(5) Marianne Keuhn is an audit partner and a member of Blackhawk Country Club. She is a lo -handicap golfer and plays in a regular foursome every Saturday morning that includes Shelly Paris, the CFO of one audit client, and Nancy Sprague, the CEO of another audit client.