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In each statement below, Beta Manufacturing is assumed to be an audit client of a local CPA firm, Green & Martin. Select from the option
In each statement below, Beta Manufacturing is assumed to be an audit client of a local CPA firm, Green & Martin. Select from the option list provided whether the party is independent or not independent in either appearance or mind in the following situations based on the AICPA's Code of Professional Conduct. Each choice may be used once, more than once, or not at all.
1. Peter Green, a partner of Green & Martin, owns the building in which Beta Manufacturing's corporate offices are located. The lease is classified as a sales-type lease by the lessor-partner. | |
2. John Carr is a staff auditor for Green & Martin who is currently working on the Beta Manufacturing audit engagement. John Carr's sister works in the sales department of Beta Manufacturing. | |
3. Jessica Martin, a partner of Green & Martin, recommended an old college friend for the open controller's position at Beta Manufacturing. The friend met Beta's employment criteria. | |
4. Beta Manufacturing also hired Green & Martin to perform compliance tax services. Beta's audit committee approved the arrangement. These services consist of preparing an income tax return. The return is approved and signed by a designated client manager. | |
5. The management of Beta Manufacturing is being sued by shareholders due to some previous irregularities in financial statements audited by Green & Martin. Beta is likely to file a cross claim against Green & Martin. | |
6. The engagement letter sent to Beta Manufacturing by Green & Martin contains an indemnification clause. It requires Beta to reimburse Green & Martin for any losses due to a lawsuit based on knowing misrepresentations by Beta's management. The audit is not required by a regulator. | |
7. Peter Green, a partner of Green & Martin, has been on the audit of Beta Manufacturing in prior years. Because of his knowledge of the client, he expects to maintain professional skepticism throughout the upcoming audit. | |
8. Jessica Martin, a partner of Green & Martin, owns a vacation home with Tim Larson, a principal shareholder of Beta Manufacturing. The value of the vacation home is material to Jessica Martin. | |
9. Mary Jacobs, a manager assigned to the audit of Beta Manufacturing, has had several confrontations with the CEO and feels she cannot be objective when performing the audit. | |
10. Susan Smith, a manager of Green & Martin, owns less than 1% of the outstanding shares of Beta Manufacturing, an audit client. Susan does not work on the Beta Manufacturing engagement. |
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