Compliance and Auditing Ethics and Professional Standards 2

Question 1

Which type of auditor independence threat arises when an auditor has an excessive degree of familiarity or sympathy with a client due to a long-standing relationship?

Accepted Answer

Familiarity threat

Answer

Self-interest threat

Answer

Advocacy threat

Answer

Intimidation threat

Question 2

An auditor who accepts a contingent fee based on the outcome of their engagement faces which type of independence threat?

Accepted Answer

Self-interest threat

Answer

Intimidation threat

Answer

Advocacy threat

Answer

Self-review threat

Question 3

Under SEC auditor independence rules, which family relationship would most clearly impair independence when the family member holds a financial reporting oversight role at the audit client?

Accepted Answer

A spouse

Answer

A distant cousin who lives in another state

Answer

An in-law who lives in a separate household

Answer

A former college roommate

Question 4

The 'cooling-off period' requirement in audit regulations refers to:

Accepted Answer

A waiting period before a former auditor can join a client in a key management position

Answer

A mandatory break between successive audit sessions to reduce fatigue

Answer

The time required by standards to review and finalize audit workpapers

Answer

A mandatory vacation period for audit staff after a stressful engagement

Question 5

Which of the following best describes 'objectivity' in the context of internal auditing per IIA standards?

Accepted Answer

An unbiased mental attitude that allows internal auditors to perform engagements without compromising quality

Answer

The complete absence of any professional or personal relationship with the organization

Answer

Freedom from any financial compensation tied to the organization's performance

Answer

External auditor independence from the board and audit committee

Question 6

When an auditor is asked to serve as an expert witness in litigation directly involving a client they currently audit, what type of independence threat does this create?

Accepted Answer

Advocacy threat

Answer

Self-interest threat

Answer

Familiarity threat

Answer

Self-review threat

Question 7

According to AICPA standards, which of the following is a recognized safeguard that can mitigate threats to an auditor's independence?

Accepted Answer

Having an independent engagement quality reviewer examine the work performed

Answer

Increasing the audit fee to compensate for added risk

Answer

Limiting the scope of the audit to reduce exposure

Answer

Deferring issuance of the audit report while threats persist