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conditions that undermine independence

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For each scenario below, describe which of the five general conditions that undermine
independence in appearance is most relevant,
a. An auditor recommends its audit clients' services to other clients based on her understanding of the quality of such services.
b. A partner serves an audit client even though her grandmother has 40 percent of
her investments in the client.
c. An auditor helps his audit clients by making adjusting entries to correct financial
statements for any amount below a pre-established threshold.
d. A partner audits the income tax expense for a client, which is based on the taxable
income computed for the client by the taxation division of partner's firm.
e. A partner serves a client for which his brother-in-law serves as the chief information officer.

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Five general conditions that undermine independence are discussed very comprehensively in this explanation.

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1. For each scenario below, describe which of the five general conditions that undermine
independence in appearance is most relevant,
a. An auditor recommends its audit clients' services to other clients based on her understanding of the quality of such services.
The condition is broker or dealer, investment adviser, or investment banking services. (Based on Section 201 (a) of the Sarbanes Oxley Act, and Section 10A(g) of the Securities Exchange Act) It violates the principle of and auditor cannot serve in an advocacy position.
b. A partner serves an audit ...

Solution provided by:
Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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