How is the CPA company insulated from being pressured by management?
A) The audit committee approves the external auditor's fees and assists with the auditor's report.
B) The chairman of the board approves the external auditor's fees and assists with the auditor's report.
C) The tax department approves the external auditor's fees and assists with the auditor's report.
D) The CPA company is not insulated from management.

Question

Quizplus · Accepted Answer

The audit committee, which is composed of independent members of the board of directors, approves the fees paid to the external auditor and assists with the auditor's report. This helps to insulate the CPA company from being pressured by management, as the audit committee is tasked with overseeing the external audit process and ensuring its integrity. Option B is incorrect because it suggests that the chairman of the board is solely responsible for approving the external auditor's fees, which is not the case. Option C is also incorrect because the tax department has no role in approving or overseeing the external audit process. Option D is incorrect because there are mechanisms in place to insulate the CPA company from management pressure.

How Is the CPA Company Insulated from Being Pressured by Management