The attribute of independence has been traditionally associated with the CPA's function of auditing and expressing opinions on financial statements.

{Required:}

a. What is meant by "independence" as applied to the CPA's function of auditing and expressing opinions on financial statements? Discuss.

b. CPAs have imposed upon themselves certain rules of professional conduct that induce their members to remain independent and to strengthen public confidence in their independence. Which of the rules of professional conduct are concerned with the CPA's independence? Discuss.

c. The Wallydrug Company is indebted to a CPA for unpaid fees and has offered to issue to him unsecured interest-bearing notes. Would the CPA's acceptance of these notes have any bearing upon his independence in his relations with the Wallydrug Company? Discuss.

d. The Rocky Hill Corporation was formed on October 1, 19X0 and its fiscal year will end on September 30, 19X1. You audited the corporation's opening balance sheet and rendered an unqualified opinion on it. A month after rendering your report you are offered the position of secretary of the Company because of the need for a complete set of officers and for convenience in signing various documents. You will have no financial interest in the company through stock ownership or otherwise, will receive no salary, will not keep the books, and will not have any influence on its financial matters other than occasional advice on income tax matters and similar advice normally given a client by a CPA.

Required:

1. Assume that you accept the offer but plan to resign the position prior to conducting your annual audit with the intention of again assuming the office after rendering an opinion on the statements. Can you render an independent opinion on the financial statements? Discuss.

2. Assume that you accept the offer on a temporary basis until the corporation has gotten under way and can employ a secretary. In any event you would permanently resign the position before conducting your annual audit. Can you render an independent opinion on the financial statements? Discuss.