An Auditor Is About to Commence a Recurring Annual Audit

question 20

Multiple Choice

An auditor is about to commence a recurring annual audit engagement. The continuing auditor's independence would ordinarily be considered to be impaired if the prior year's audit fee:

• A)was unusually large.
• B)has not been paid and will not be paid for at least twelve months.
• C)has not been paid and the client has filed a voluntary petition for bankruptcy.
• D)was renegotiated during the prior year audit based on the need for expanded testing.

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Definitions:

Annul

To legally declare invalid or void, commonly used in contexts such as marriage annulment, which renders the marriage as if it never existed.

Confidential Relationship

A relationship where one party places trust and confidence in another with the expectation that the latter will act in their best interest, typically involving nondisclosure of certain information.

Undue Influence

A situation where an individual is able to persuade another's decisions due to the relationship between the two parties, often leading to unfair advantage.

Duress

A situation where a person performs an act as a result of violence, threat, or other pressure against the person, raising questions about the voluntariness of the act.