Independence Issues That Would Preclude an Audit Firm from Proposing

question 46

Multiple Choice

Independence issues that would preclude an audit firm from proposing on a potential audit client:

• A) are only applicable on public company audit engagements.
• B) are not affected by the Sarbanes-Oxley Act.
• C) cannot be determined until the audit planning process is complete.
• D) may result from current business relationships of the audit firm's former employees.

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Definitions:

NPV

Net Present Value, a calculation used to assess the profitability of an investment, considering the time value of money.

Discounted Payback Period

The period it takes for the cash flows from a capital investment project to equal the initial investment cost, considering the time value of money.

After-Tax Cash Flows

After-tax cash flows are the net cash inflows and outflows of a business after taxes have been accounted for, used in analysis of investment projects.

Liquidation

The process of bringing a business to an end and distributing its assets to claimants, often when the company is insolvent.