Auditing and Assurance Services 1st Edition by Iris Stuart

Exercise 32

Independence requirements. Based on the requirements of the AICPA Code of Professional Conduct, determine whether independence is impaired in the following situations.
a. During the time of the audit, the auditor's spouse has a direct interest in the client.
b. During the time of the audit, the auditor has a material indirect financial interest in the client.
c. During the time of the audit, the auditor has a loan from the client.
d. During the period of the professional engagement, the audit partner owns 8 percent of the client's stock.
e. If the audit partner's spouse works in the sales department for one of the auditor's clients, is the partner's independence impaired
f. Is the CPA permitted to have credit card debt from an audit client
g. Is the CPA allowed to have a car loan from an audit client
h. Is a CPA permitted to accept an audit engagement for the mortgage company holding his or her home mortgage
i. You fail to file a state tax return in the current year. Have you violated the code of professional conduct by your action
j. Have you committed an act discreditable to the profession when you fail to pay payroll taxes for your housekeeper
k. You know that the financial statements for the client you are auditing are not materially correct, but you sign off on the audit opinion without requiring the client to make the corrections. Have you violated the code of professional conduct