Mavis, CPA, Has Audited the Financial Statements of South Bay

question 61

Multiple Choice

Mavis, CPA, has audited the financial statements of South Bay Sales Incorporated for several years and had always been paid promptly for services rendered. Last year's audit invoices have not been paid because South Bay is experiencing cash flow difficulties and the current year's audit is scheduled to commence in one week. With respect to the past due audit fees, Mavis should:

• A)perform the scheduled audit and allow South Bay to pay when the cash flow difficulties are alleviated.
• B)perform the scheduled audit only after arranging a definite payment schedule and securing notes signed by South Bay.
• C)inform South Bay's management that the past due audit fees are considered an impairment of auditor independence.
• D)inform South Bay's management that the past due audit fees may be considered a loan on which interest must be imputed for financial statement purposes.

---

Definitions:

Decision Usefulness

A principle in accounting that information should help users make decisions regarding their investments, credit, and similar considerations.

Conceptual Framework

A system of interrelated objectives and fundamentals that provides the foundation for financial accounting and reporting standards.

Accounting Project

A task or series of tasks undertaken to maintain, review, or improve the financial recording and reporting processes within an organization or for a specific purpose.

Objectives Project

A planned set of tasks aimed at achieving specific goals within a defined timeframe, usually with set objectives to guide its execution.