Under the AICPA Independence Rules, Independence Can Be Considered Impaired

question 72

Multiple Choice

Under the AICPA independence rules, independence can be considered impaired when:

• A)billed fees remain unpaid for professional services for more than ninety days.
• B)a client in bankruptcy has unpaid fees for more than one year.
• C)there is litigation by the client related to the auditor's tax or other nonaudit services.
• D)when there is a lawsuit by the client claiming deficiencies in the previous year's audit.

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Definitions:

Double-Entry System

An accounting method that records each transaction in at least two accounts, ensuring the accounting equation (Assets = Liabilities + Equity) remains balanced.

Debit Accounts

Accounts that are increased by debits and decreased by credits, commonly including assets and expenses.

Credit Accounts

Financial accounts that track money owed to creditors; they increase with credit entries and decrease with debit entries, reflecting the entity's borrowing of funds.

Accounting Equation

The fundamental equation of double-entry bookkeeping, stating that Assets = Liabilities + Equity.