Explain how the acceptance of large, high-risk audit clients for relatively high audit fees may threaten an audit firm’s de facto and perceived independence. Under what circumstances should such prospective clients be avoided?
Answer to relevant QuestionsHow is an auditor’s examination affected when a client has engaged in significant related-party transactions? What measures should an auditor take to determine that such transactions have been properly recorded by a client?Does the AICPA Code of Professional Conduct discuss the collegial responsibilities of CPA firms? In your opinion, were representatives of either Ernst & Young or Kenneth Leventhal & Company unprofessional in this regard ...Should companies be allowed to hire individuals who formerly served as their independent auditors? Discuss the pros and cons of this practice.Identify the fraud risk factors posed by DHB for its independent auditors. Which of these factors, in your opinion, should have been of primary concern to those auditors?As noted in the case, there was an almost complete turnover of the staff assigned to the New Century audit engagement team from 2004 to 2005. What quality control mechanisms should accounting firms have in such circumstances ...
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