Question 1 Answers:

1- B
2- A
3- B
4- A
5- D

Question 2 Answers:

Answer:

1. E

2. F

3. A

4. F

5. E

6. C or F

7. C

8. B

Question 3 Answers:

1)

1. The scope of the audit has been restricted. One example is when the client will not permit the
auditor to confirm material receivables.

Another example is when the engagement is not agreed upon until after the client's year-end
when it may be impossible to physically observe inventories.

2. The financial statements have not been prepared in accordance with generally accepted
accounting principles. An example is when the client insists upon using replacement costs for
fixed assets.

3. The auditor is not independent. An example is when the auditor owns stock in the client's
business.
2)
Rule 101: A member in public practice shall be independent in the performance of professional
services as required by standards promulgated by bodies designated by Council.

Covered members:

1. Individuals on the attest engagement team

2. An individual in a position to influence the attest engagement, such as individuals who

supervise or evaluate the engagement partner

3. A partner or manager who provides nonattest services to the client

4. A partner in the office of the partner responsible for the attest engagement

5. The firm and its employee benefit plans

6. An entity that can be controlled by any of the covered members listed above or by two or
more of the covered individuals or entities operating together

An example of a direct ownership

Partner’s spouse has a financial interest in a company

An example of an indirect ownership

Interest is the covered member’s ownership of a mutual fund that has an investment in a client.