Explain how materiality differs for failure to follow GAAP and for lack of independence.

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Part $1$

A$.$

Materiality for lack of independence in audit reporting is easiest to define. If the auditor lacks independence as defined by the AICPA Code of Professional Conduct$,$ it is always considered highly material and therefore a disclaimer of opinion is always necessary. That$$ is$,$ either the CPA is independent or not independent. For failure to follow$$ GAAP, there are three levels of$$ materiality: immaterial,$$ material, and highly material.

B$.$

Materiality for lack of independence in audit reporting is hardest to define. If the auditor lacks independence as defined by the AICPA Code of Professional Conduct$,$ there are three levels of$$ materiality: immaterial,$$ material, and highly material. For failure to follow$$ GAAP, the level of materiality does not matter and therefore a disclaimer of opinion is always necessary.

C$.$

For materiality for lack of$$ independence, if the auditor lacks independence as defined by the AICPA Code of Professional Conduct$,$ it is always considered highly material and therefore a disclaimer of opinion is always necessary. For failure to follow$$ GAAP, there are two levels of$$ materiality: material and highly material. Therefore only a qualified opinion is necessary.

D$.$

None of the above.