A Succinct, but Comprehensive Definition of Independence Is That an Auditor

question 30

Multiple Choice

A succinct, but comprehensive definition of independence is that an auditor ________.

• A) must be independent in fact and in appearance in order to maintain credibility
• B) must not have a direct financial interest in a client
• C) must have a license to practice as a public accountant
• D) must not take on as an audit client a company owned by a member of his or her immediate family

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Definitions:

Unrealized Loss

A decrease in the value of an investment that has not yet been sold and, thus, does not affect realized financial statements.

Available-for-Sale Security

A financial asset that a company intends to sell but not immediately or in the near term, reported at fair value.

Treasury Stock

Treasury stock consists of shares that were issued and subsequently reacquired by the issuing corporation, held in the company's treasury.

Bonds Payable

Bonds Payable are long-term liabilities representing the amount borrowed by an entity that must be repaid to bondholders, typically with interest, by a certain date.