Which of the following represents a situation in which an auditor is independent of its client?
A)The audit fee paid by the client represents 10% of the auditor's annual gross revenue.
B)The auditor takes a personal loan from the president of the company.
C)The auditor's dependent son holds 25 shares of the client's common stock.
D)The auditor has not received payment for the previous audit services.

Question

Quizplus · Accepted Answer

An auditor is considered independent if their judgment and audit work are not influenced by relationships or financial dependencies with the client. Option A, where the audit fee constitutes 10% of the auditor's annual gross revenue, does not automatically impair independence unless it creates a financial dependency on the client. The other options (B, C, D) directly involve financial interests or personal relationships that could impair independence.

Which of the Following Represents a Situation in Which an Auditor