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Flashcards in Independence Issues 1 Deck (30)
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1
Q

Firm has a depository account in a bank that is attest client and going through some financial difficulties and Covered member has $250,000 in depository account.

A

No

2
Q

Covered member has $260,000 in depository account in a bank that is an attest client and going through some financial difficulties. The 10,000 that is at risk in not material to Covered member.

A

No

3
Q

Covered member had $300,000 in depository account in a bank that is an attest client. Client withdrew 50,000 within 30 days of assignment of the attest work.

A

No

4
Q

The auditor has a brokerage account that holds both U.S. securities and assets other than cash or securities.

A

Yes

5
Q

The auditor has a brokerage account that holds U.S. securities in excess of Securities Investor Protection Corporation coverage limits but loss on this investment is not material to Covered member.

A

No

6
Q

The auditor has a brokerage account that includes assets other than cash or securities.

A

Yes

7
Q

The auditor has a cash balance in a brokerage account that is fully covered by the Securities Investor Protection Corporation.

A

No

8
Q

Member Spencer maintains a brokerage account at TYD Brokers, an attest client. To be independent, Spencer need ensure only that TYD renders services to him on the same terms and conditions as to other customers.

A

No

9
Q

Member Spencer maintains a brokerage account at TYD Brokers, an attest client. To be independent, Spencer need ensure only that any assets he has in the account that are subject to risk of loss are immaterial to his net worth.

A

No

10
Q

Covered member owns an insurance policy that does not contain an investment option and was issued under normal terms, procedures, and requirements.

A

No

?

11
Q

Covered member owns an insurance policy with an investment option, and she invested a small amount in the ABC Mutual Fund, even though Kim is a covered member for purposes of ABC, which is an audit client of her firm.

A

?

12
Q

Member Spencer maintains a brokerage account at TYD Brokers, an attest client. To be independent, Spencer must ensure both that TYD renders services to him on the same terms and conditions as to other customers and that any assets he has in the account that are subject to risk of loss are immaterial to his net worth.

A

Yes

13
Q

The Patton Accounting Firm and one of its partners, Tilly, have depository accounts at the ABC Bank. ABC has just approached Patton about becoming the bank’s audito. Would there be an independence problem if Patton became ABC’s auditor? ABC is in robust financial health and Tilly’s account is not fully insured, but the uninsured amount is not material to her financial situation.

A

No

14
Q

Member Spencer maintains a brokerage account at TYD Brokers, an attest client. To be independent, Spencer need ensure only that any assets he has in the account that are subject to risk of loss are immaterial to his net worth.

A

No

15
Q

The Patton Accounting Firm and one of its partners, Tilly, have depository accounts at the ABC Bank. ABC has just approached Patton about becoming the bank’s auditor. Would there be an independence problem if Patton became ABC’s auditor? ABC is in robust financial health and Tilly’s account is fully insured.

A

No

16
Q

The auditor has an automobile loan from a client bank, collateralized by the automobile. Would there be an independence problem?

A

No

17
Q

Auditor has a joint, closely held business investment with the client that is material to the auditor’s net worth. Would there be an independence problem

A

Yes

18
Q

Client has a mortgage loan, executed with a financial institution client on March 1, 1990, that is material to the auditor’s net worth. Would there be an independence problem

A

No

19
Q

Client has a mortgage loan, on normal terms bought before the bank became an attest client. It is kept current and no modification were made to mortgage loan and FV market value of the collateral exceeds the outstanding loan.

A

No

20
Q

Both auditor and attest client own Microsoft stock.

A

No

21
Q

Both auditor and attest client purchase major stakes in a local technology start-up company.

A

Yes

22
Q

One of audit firm’s covered members is friends with attest client’s chief executive officer, and they pursue their passion for skiing by jointly purchasing a ski chalet in Vail.

A

Yes

23
Q

Tondry is a CPA working for a Big Four firm as an auditor. Tondry has purchased a small minority interest in XYZ Co., which provides technical computer support and other nonaudit services for businesses. At least one of the businesses that receives technical support from XYZ (and purchases software on XYZ’s recommendation for which XYZ received a commission), is an audit client for which Tondry is on the audit engagement team. Tondry’s actions have created an independence problem?

A

No

24
Q

Tondry is a CPA working for a Big Four firm as an auditor. Tondry has purchased a small minority interest in XYZ Co., which provides technical computer support and other nonaudit services for businesses. At least one of the businesses that receives technical support from XYZ (and purchases software on XYZ’s recommendation for which XYZ received a commission), is an audit client for which Tondry is on the audit engagement team. The employees and agents of XYZ must follow independence rules just as Tondry must.

A

No

25
Q

Auditor has a operating lease with attest client on terms and condition of comparable lease in area and firm is always on time with its payment.

A

No

26
Q

Auditor firm has a operating lease with attest client on terms and condition of comparable lease in area. Firm fails sometimes to make the payment on time.

A

Yes

27
Q

Karen is on the audit team and her mother is NSC’s CEO.

A

Yes

28
Q

Karen is on the audit team and knows that her mother is a receptionist at NSC who over the years has placed most of her savings into NSC stock.

A

Yes

29
Q

Karen is a tax partner in the In-and-Out office that audits NSC and her mother is a receptionist at NSC who owns such a large chunk of NSC stock that she could if she wished to exercise significant influence over NSC.

A

Yes

30
Q

Karen is a tax manager at the In-and-Out office that audits NSC and she provides 20 hours of tax advising to NSC per year while her mother-in-law is CEO at NSC.

A

No