Question

According to the profession's ethical standards, an auditor would be considered independent in which of the...

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

Group of answer choices

The auditor has an outstanding credit card balance with the audit client for $7,000

The client pays a small commission to the auditor for referrals made for valuation services

The client owes the auditor fees for two consecutive annual audits

The auditor is also an attorney who advises the client as its general counsel

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Answer #1

Auditing is an independent examination conducted by the auditor. Thus independency of an auditor to an entity in which he is appointed as auditor, is a must in an audit. The independence of auditor ensures that the auditor is able to form an opinion without being affected by any influences. It helps the auditor to maintain an attitude of professional skepticism and to be able to act with integrity. Auditor's independence includes both Independence of mind & Independence in appearance.

In the given instances,

"The client pays a small commission to the auditor for referrals made for valuation services"

&

"The client owes the auditor fees for two consecutive annual audits"

shall be considered independent as it doesnt influence the auditor in forming an opinion.

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