What Does Section 206 of Title II Prevent a Public-Accounting

question 16

Multiple Choice

What does Section 206 of Title II prevent a public-accounting firm from doing?

• A) Auditing a client if the CEO, chief accountant, or chief financial officer of the client worked for the public accounting firm and participated in auditing if that client in the previous 12 months from the beginning of the audit.
• B) Hiring the CEO, chief accountant, or chief financial officer if the client worked for the public accounting firm and participated in auditing of that client in the 12 months after the beginning of the audit.
• C) Having direct telephonic or E-mail communications with the CEO, chief accountant, or chief financial officer if the client worked for the public accounting firm and participated in auditing of that client in the previous 12 months from the beginning of the audit.
• D) Publishing their findings in the audit to the SEC for public inspection by other corporations.

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Definitions:

Common Fixed Costs

Costs that do not change in total regardless of changes in the level of activity or volume of output and are shared among multiple products or departments.

Accounting Records

Documents and books that systematically record all financial transactions of an entity, providing a foundation for financial statements and tax returns.

Cost-Plus Transfer

Cost-plus transfer refers to a pricing method where the selling price of a product is determined by adding a fixed profit margin to the total cost of production or procurement.

Market-Price Transfer

The practice of setting the price for goods or services sold between divisions within the same company based on the current market price.