- "GAO Rules: Impairment of Independence in Preparing Accounting

Question 24 Best Co. is required to file their audited financial statements with the Government Accountability Office and have hired Cole & Dierks, CPAs to perform the engagement. Under GAO rules, which of the following services related to preparing accounting records will ALWAYS impair independence? None of the services described will always impair independence if the proper conditions are met Recording transactions for which management has determined or approved the appropriate account classification, or posting coded transactions to an audited entity's general ledger. Preparing financial statements based on information in the trial balance. Posting entries that have been approved by an audited entity's management to the entity's trial balance. Question 25 McGrath & Grove, CPAs, are the auditors for a number of publicly owned companies that file their financial statements with the SEC. Under the rules of the Public Company Accounting Oversight Board, which of the following services, performed during the audit and professional engagement period, would impair McGrath & Grove's independence with any of these companies? . Provides any service or product to the audit client for a contingent fee or a commission, or receives from the audit client, directly or indirectly, a contingent fee or commission Il. Provides any non-audit service to the audit client related to marketing, planning, or opining in favor of the tax treatment of, a transaction that is defined as an aggressive tax position transaction Ill. Provides any tax service to a person in a financial reporting oversight role at the audit client, or an immediate family member of such person I and II O l and Ill II and III 1, II, and III Question 26 Which of the following situations may present a conflict of interest for a member? I. Referring a tax client to an insurance broker who refers clients to the member under an exclusive agreement to do so. Il. Performing litigation services for a client who has been named as a defendant in a lawsuit. Ill. Performing tax planning services to a client who is undergoing a divorce. I only II only II and III O I, II, and III Question 27 Morales, a member in public practice, begins an engagement with Seagar Company by providing a fee estimate of $2,000. At the time that Morales gave the fee estimate to Seagar, he knew that the fees incurred and charged to Seagar would be closer to $10,000. Which of the following is CORRECT about Morales' actions? Morales' actions are perfectly acceptable in a highly competitive market for accounting services. Morales has done nothing wrong. It is up to the client to determine if a fee estimate is reasonable. Morales' actions would be considered false, misleading, or deceptive. Because the $2,000 was just an estimate and not a promise, Morales has done nothing wrong. Question 28 Rosenfelt, a member, is the controller at Palom Corporation. He has worked for the company for five years under the direct supervision of Eisen, the CFO. Eisen often yells at Rosenfelt, makes a scene in front of fellow workers, and blames Rosenfelt for errors on engagements he hasn't even worked on. Rosenfelt has expressed an interest in suing for harassment. This situation illustrates which of the following threats to compliance? $50,000 $100,000 $1,000,000 $5,000,000