1. Distinguish between independence of mind and independence in appearance.

A.

Independence of mind requires audit partner to rotate to help maintain and keepindependence, whereas independence in appearance maintains that the work produced is mainly for support of the client and that relationship.

B.

Independence of mind is a code of professional ethics where auditors remain skeptical of the information they receive throughout theaudit, whereas independence in appearance is a code of professional conduct that allows any CPA firm to sign the financials of a company.

C.

Independence of mind is dependent upon the board of directors maintaining a professional level with theauditors, whereas independence in appearance provides for restrictions on employment of former audit firm employees by a client.

D.

Independence of mind exists when the auditor is actually able to maintain an unbiased attitude throughout theaudit, whereas independence in appearance is dependent onothers' interpretation of this independence and hence their faith in the auditor.

2. Identify an activity that may not affect independence of mind but is likely to affect independence in appearance.

A.

Engagement of the CPA and payment of audit fees by a third party.

B.

Ownership of an immaterial indirect financial interest in the audited client.

C.

Payment of high audit fees dependent upon profitable financials.

D.

Dependence upon a client for a large percentage of audit fees.

E.

Performance of valuation services and actuarial services for the same company.