Highlight the correct answer please

Distinguish between independence of mind and independence in appearance. State three activities that may not affect independence of mind but are likely to affect independence in appearance.

Distinguish between independence of mind and independence in appearance.

A.

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.

B.

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.

C.

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.

D.

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. Select three activities that may not affect independence of mind but are likely to affect independence in appearance.

A.

Payment of high audit fees dependent upon profitable financials.

B.

Ownership of a financial interest in the audited client.

C.

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

D.

Engagement of the CPA and payment of audit fees by management.

E.

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

List the three conditions that require a departure from an unqualified opinion and give one specific example of each of those conditions. The three conditions requiring a departure from an unqualified opinionare: A. (1) The financial statements have not been prepared in accordance withGAAP, (2) other auditors areinvolved, (3) the scope of the audit has been restricted. B. (1) The auditor is notindependent, (2) the scope of the audit has beenrestricted, (3) there is a lack of consistent application of GAAP. C. (1) The scope of the audit has beenrestricted, (2) the financial statements have not been prepared in accordance withGAAP, (3) the auditor is not independent. D. (1) The auditor has not beenpaid, (2) there is a lack of consistent application ofGAAP, (3) the scope of the audit has been restricted. An example of the scope of the audit being restrictedis: A. the client will not permit the auditor to confirm material receivables. B. the auditor is not appointed until after theclient's year-end making the phsycial observation of inventory atyear-end impossible. C. the auditor owns stock in theclient's business. D. Both A and B are examples of the scope of the audit being restricted. An example of the financial statements not prepared in accordance with GAAPis: A. the client values fixed assets at historical cost. B. the client values inventory at historical cost. C. the client insists on using replacement costs for fixed assets. D. none of the above. An example of when the auditor is not independentis: A. the auditor is friends with someone on the board of directors of theclient's business. B. the auditor also provides tax services for theclient's business. C. the auditor owns stock in theclient's business. D. none of the above.