Which one of the following situations is most likely to impair independence? Legal action is taken by
A) the auditee against the audit firm in relation to taxation services provided.
B) a third party against both the auditee and the audit firm.
C) the auditee against the audit firm claiming deficiencies in the prior year's audit.
D) the auditee against the audit firm in relation to management consulting advice.

Question

Quizplus · Accepted Answer

Legal action taken by the auditee against the audit firm claiming deficiencies in the prior year's audit is likely to impair independence as it may create a conflict of interest, making it difficult for the audit firm to remain objective and independent in subsequent audits. The other options may also create some level of threat to independence, but they are not as directly related to the audit function as option C.

Which One of the Following Situations Is Most Likely to Impair