The Statutory Requirements for Independence Mean an Auditor Is Prohibited

question 42

Multiple Choice

The statutory requirements for independence mean an auditor is prohibited from engaging in audit activity if:

• A) the auditor is aware of a conflict of interest situation in relation to the client but doesn't take all reasonable steps to resolve it.
• B) the auditor is not aware of a conflict of interest situation in relation to the client and doesn't take all reasonable steps to resolve it.
• C) there is a breach of the ethical requirements.
• D) there is a breach of the auditor registration requirements.

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Definitions:

Income Ratio

A financial metric comparing different aspects of income, such as net profit to sales, to assess profitability or performance.

Capital Deficiency

A scenario in which a company's debts surpass its possessions, suggesting a risk of not being able to meet its financial obligations.

Matching

An accounting principle that involves recognizing expenses in the same period as the revenues they helped generate, to accurately reflect profits.

Code Letter

A system that uses letters or numbers for the classification or identification of items in a list or database.