When there are substantial unpaid fees outstanding from previous audit work:
A) the audit opinion should be withheld.
B) independence can be compromised if the unpaid fees take on the character of a loan.
C) the auditor should seek removal from office.
D) a fee premium can be applied to the current audit.

Question

Quizplus · Accepted Answer

If there are substantial unpaid fees outstanding from previous audit work, independence can be compromised if the unpaid fees take on the character of a loan. This is because the auditor may be influenced to issue a favorable audit opinion to retain the client or recover the unpaid fees. Therefore, the best choice in this situation is B. The other options are not appropriate because withholding the audit opinion or seeking removal from office would not address the underlying issue of compromised independence, and applying a fee premium to the current audit may not be justified.

When There Are Substantial Unpaid Fees Outstanding from Previous Audit