A CPA Firm Knows That Clients Find It Difficult to Change

question 24

Multiple Choice

A CPA firm knows that clients find it difficult to change auditors after a professional relationship has been in place for several years because the termination of an auditor often makes investors concerned about the trustworthiness of a company's financial statements.To take advantage of this fact,this CPA firm routinely bids on new audit engagements at a fee that is likely to be 25 percent lower than the fees bid by its competitors.The CPA firm plans to recoup this fee differential by steadily raising its fees to above-market rates in subsequent years.The CPA firm's policy creates:

• A) A current conflict of interest
• B) A foreseeable future conflict of interest
• C) An appearance of a conflict of interest, but not an actual one
• D) No conflict of interest

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Definitions:

Staff Positions

Roles within an organization dedicated to providing advice and support services to line positions, rather than being directly involved in the core operations.

Unanimity

A state of agreement by all parties or members involved in a decision, often required in certain decision-making processes to ensure total consensus.

Groupthink

A phenomenon occurring within a group of people, where the desire for harmony or conformity results in an irrational or dysfunctional decision-making outcome.

Freedom from Office Politics

A work environment where employees can focus on their tasks and responsibilities without the need to engage in or be affected by internal competition, manipulation, or personal conflicts.