Audit Analysis

27-1. Which of the following best describes the dual nature of independence as emphasized in the Principles of the Code of Professional Conduct [hereafter, the Code]? a. Independence means being both impartial and unbiased. b. Independence is synonymous with integrity and objectivity. c. CPAs in public practice must be figuratively and literally independent. d. CPAs in public practice must be independent and must appear to be so.

27-2. The Code defines The Public Interest as the investors and creditors who rely on audited financial statements as the basis for their decisions. What is the error(s) in this statement? a. The public interest is represented by the entities that employ or contract with CPAs, not by those who use their services. b. The public interest is considered to be all those who use financial statements, whether or not CPAs have audited those statements. c. The public interest is not limited to investors and creditors given that all of society benefits from and relies upon the services that CPAs provide. d. The public interest is regarded as the participants in financial markets because they are the ones who derive the most value from CPAs services.

27-3. What is the rationale for the Codes inclusion of its conceptual framework? a. It is impossible to address every ethical dilemma a CPA may encounter. b. The framework relieves a CPA from the burden of exercising professional judgment. c. Rules are not useful in resolving the ethical issues encountered in the accounting profession. d. Without a framework, new rules must be continually added to the Code, making it cumbersome.