problem set

answer the following question in short answers:

1)Indicate if independence is required for an accoun-tant to perform the following tasks:

a)Render tax advice to a nonaudit client

b)Issue an audit opinion concerning a government-run airport

c)Issue a review opinion concerning quarterlyreports of a privately held company

d).Make recommendations as an internal auditor to your employee

E)Determine proper account classifications prior to recording journal entries that will appear on your employer’s books and affect the content of itsyear-end audited financial statements

f.Issue an audit opinion concerning the financial statements of an employer-funded pension plan

g)Provide litigation-related advice to a nonaudit

4)Ryan and Darla are married. Darla is partner atErnst and Notold, CPAs, where she serves as the lead engagement partner on the audit of MortisCompany. Darla does not own any stock in MortisCompany, but Ryan owns 1% of Mortis Company’s preferred stock. Ryan’s ownership of Mortis stock is not material to his net worth.a.Does Ernst and Notold, CPAs satisfy the independence standard to audit Mortis?b.Would your answer be the same if Ryan wasDarla’s brother instead of her husband?c.Would your answer be the same if Ryan wasDarla’s grown son who is married to a highly suc-cessful investment banker?

5)A CPA firm has numerous partners, all of whomwork out of the firm’s sole office in New York City.Jeanne is the lead attest partner on the audit of BellBank, a small financial institution located in mid-town Manhattan. The audit team is comprised offive professional staff members and two administra-tive staff members. Tony is the managing partner ofthe firm, who also serves on the firm’s CompensationCommittee.Casey is the partner in charge of quality con-trol monitoring for the firm, and Carina is the CPAfirm’s technical expert on derivatives valuation andauditing. Carina was consulted by the audit engage-ment team to help resolve a difference of opinionbetween the client and the firm on how a securiti-zation transaction should be reported. Liam is a taxmanager who spent four hours addressing a clientmatter with the state sales tax authorities.Which of these individuals is a covered mem-ber regarding the audit of Bell Bank?

6).Sterling, CPAs has offices in major cities throughoutthe United States. Julieanne, a partner at Sterling,has a brother named Hudson who recently accepteda position as CFO of Tivoli Gardens, Inc. Thelead partner on the Tivoli Gardens engagement islocated in the firm’s Minneapolis, Minnesota office,the client is located in Iowa, and partner Julieanne is located in Denver, Colorado. Julieanne spends all ofher professional time auditing Owen Cornery, Inc.,an unrelated glass manufacturer.Does Sterling, CPAs have the independence toaudit Tivoli Gardens, Inc.?

7).Bob is an accounting supervisor who works inJimenco’s tax department. Sharon is a partner atDelight, CPAs, and Delight, CPAs audits Jimenco.Recently, Bob asked Sharon if he could “make someextra cash” by preparing individual tax returns onweekends for Delight, CPA during tax busy season.Delight, CPA hired Bob to prepare tax returns onthe condition that his employment will be temporaryand he will not have any involvement in the prepara-tion, presentation, or content of Jimenco’s financialstatements. Does Delight, CPAs satisfy the indepen-dence standard to audit Jimenco?