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- Which statement is FALSE? 1)Under SEC rules, we cannot have a subcontracting relationship with an audit client and/or affiliate. 2)Under the SEC rules, a third-party resource relationship with an audit client is usually prohibited because it creates a mutuality of interest between KPMG and the audit client. 3)Under the SEC rules, an alliance relationship may be possible, subject to materiality and significance considerations. 4)Under the IESBA rules, a subcontracting relationship might be possible, subject to materiality and significance considerations.Which of the following is an example of a self-interest threat to the fundamental principles? The fee quoted is so low that it may be difficult to perform the audit The auditor provides legal consultancy services to the company None of these Auditor prepared the accounts for the companyAlthough audit reports should provide assurance to investors and creditors that financial information presented is free of material misstatements and in accordance with GAAP, should audit reports be used to solicit investments, credit, or sales in a manner similar to Jim Bakker’s? How can a CPA firm prevent such behavior?
- Which statement about the SEC independence rules on bookkeeping services is not accurate? a) Bookkeeping services are prohibited even if the client approves the books and records as the services are performed. b) Bookkeeping services are permitted if the individuals performing these services perform no other services. c) Bookkeeping services are prohibited in most circumstances under the SEC's independence rules. d) Bookkeeping services are prohibited even if the fees from these services are less than the audit fee.Which of the following statements is/are correct? O a. The ban on simultaneously offering consulting and auditing services to economically relevant companies within the framework of the FISG results from the bad experiences that BaFin had with corresponding offers in the context of the Wirecard scandal. O b. Violations of the so-called "blacklist" lead to significant fines being paid by the auditing company. Oc. According to the Financial Market Integrity Strengthening Act, companies are obliged to set up an audit committee to monitor the quality of the audit. O d. The external rotation of auditing firms requires more frequent tendering processes for auditing services.KPMG is the auditor for an IESBA public interest entity audit client. Which non-audit service is permitted for this type of audit client? Designing a technology system for financial reporting that generates information significant to the accounting records. Preparing annual tax returns subject to review by the client and appropriate assessment of threats and safeguards. Valuations that might create a self-review threat. Tax calculations for the purpose of preparing the accounting entries included in the financial statements on which the firm will express an opinion.
- Do you believe that the SEC should prohibit auditors from providing all nonaudit services for audit clients? Use ethical reasoning to support your answer.Which non-audit service is permitted for an SEC audit client? Preparing a point-in-time gap analysis on its technology controls compared to industry standards. Providing a technology service that records accounting entries for the client. Loaning staff to prepare the client’s tax return. Loaning staff to assist with the client’s internal audit function.What additional constraints and obligations do auditors face when offering nonaudit services to public companies?
- KPMG is the auditor of an SEC registrant and cannot perform a management function. Which of the following is NOT likely to be considered as a management function? 1.Creating a strategic plan to overhaul their supply chain. 2.Providing a detailed implementation plan for deploying technology resources in a new way. 3.Designing internal controls for financial systems. 4.Providing generic training to staff on a new accounting standard.What other restrictions and requirements apply to auditors whenproviding nonaudit services to public companies?What is EDGAR?a. A system the SEC uses to reject registration statements that do not contain adequate information.b. The enforcement arm of the SEC.c. A system designed by the SEC to allow electronic filings.d. A branch of the government that oversees the work of the SEC.