• Tiffany, CPA is the external auditor of X, Inc., a publicly traded company. X has hired Johnson Consulting to perform its internal audit function. This arrangement:
  1. Is not permitted in a PCAOB audit.
  2. Impairs the independence of Tiffany even if Tiffany has no relationship to Johnson Consulting.
  3. Is only permissible if Tiffany sets control risk at the maximum.
  4. None of the above are correct.
• An agreed-upon procedures engagement to observe an inventory count:
  1. Must include a report on the effectiveness of internal controls.
  2. Cannot include an opinion that the inventory account is free of material misstatement.
  3. Cannot be performed by a CPA.
  4. All of the above.
  5. 1 and 2 only.