Red and Green,CPAs Are the External Auditors for Blue Corporation,a

question 34

Multiple Choice

Red and Green,CPAs are the external auditors for Blue Corporation,a publicly-held company.Blue Corporation has outsourced its internal audit function to Red and Green.Which of the following statements is true?

• A)Doing internal audit work does not impair the independence of Red and Green.
• B)The independence of Red and Green is impaired only if employees of Red and Green act in a management capacity or make management decisions.
• C)The independence of Red and Green is impaired only if a member of Red and Green's engagement team is hired to manage an accounting function in Blue Corporation.
• D)Public accounting firms cannot be both the internal and external auditors for publicly-held companies and maintain independence.

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Definitions:

Present Value

The present-day value of a future cash sum or cash flow sequence, with a given interest rate.

Average Investment

The mean value of all investments held over a specific period, used to analyze investment performance.

Straight-Line Depreciation

A technique for spreading the expense of a physical asset evenly across its operational lifespan each year.

Net Present Value

A method used in capital budgeting to assess the profitability of an investment or project by calculating the difference between the present value of cash inflows and outflows.