A CPA Firm Billed for Audit Services Performed for a Client

question 12

Multiple Choice

A CPA firm billed for audit services performed for a client more than one year ago.The client has paid a portion of the fees outstanding,but it has not been able to pay the remaining balance due to cash flow problems.The CPA firm has verified that the cash flow problems are authentic and expects the client to be able to pay the remainder of the bill,but the CPA firm cannot reasonably estimate the timing of such payments.As a result,the CPA firm:

• A) Remains independent if the amounts that remain owing are immaterial to the CPA firm
• B) Remains independent if the client has paid over 50% of the total invoice outstanding
• C) Can preserve its independence if the client willingly signs a Note Payable for these services and the note bears a reasonable market rate of interest
• D) Lacks the independence to perform further attestation services

---

Definitions:

Opportunity Costs

Making a choice results in the loss of potential profit that could have been earned from choosing differently.

Increasing Opportunity

In economic terms, refers to the increasing cost associated with producing additional units of a good, implying that producing more of one good requires sacrificing increasingly larger amounts of another good.

Production Possibilities

The various combinations of goods and services that can be produced by an economy given its available resources and technology, illustrating potential trade-offs and efficiency.

Comparative Advantage

An economic principle that states a country should produce and export goods for which it is more efficient at producing than other countries, and import goods that it is less efficient at producing.