Question

Which of the following statements regarding subordination of judgment is INCORRECT?

1) The integrity and objectivity rule prohibits a CPA from subordinating his or her judgment when performing professional services for a client.
2) The subordination of judgment threat is at an unacceptable level if the CPA concludes the position taken by the firm does not result in a material misrepresentation of fact or a violation of applicable standards, laws, or regulations.
3) If the CPA concludes the difference of opinion may result in a material misrepresentation of fact or a violation of professional standards, then the CPA should discuss his or her concerns with the supervisor.
4) Self-interest, familiarity, and undue influence threats to a CPA's compliance with the integrity and objectivity rule may exist when a CPA and his or her supervisor, or another person within the CPA firm, have a difference of opinion related to the application of accounting principles, auditing standards, or other relevant professional standards.

Answer 1

The incorrect statement regarding subordination of judgment is statement 2), which incorrectly suggests that subordination of judgment might be acceptable as long as it doesn't cause material misrepresentation or violate standards, which misaligns with the CPA's duty to maintain integrity and objectivity at all times.

Step-by-step explanation:

When deliberating which of the following statements regarding subordination of judgment is INCORRECT, it is vital to understand the context within which a CPA (Certified Public Accountant) operates. The integrity and objectivity rule explicitly prohibits a CPA from subordinating his or her judgment to others when performing professional services. This ensures that all financial reporting and auditing are done without bias and in adherence to professional standards.

The INCORRECT statement in this instance is statement 2), which suggests that a subordination of judgment threat is at an unacceptable level if the CPA concludes the position taken by the firm does not result in a material misrepresentation of fact or a violation of standards, laws, or regulations. This implies that it is permissible to subordinate judgment as long as the end result does not include a material misrepresentation, which is contrary to the prohibition of any subordination of judgment according to the integrity and objectivity rule.on the contrary, it would be appropriate for a CPA to discuss any concerns with a supervisor if there is a significant disagreement that may lead to a material misrepresentation or violation of professional standards as stated in statement 3). Moreover, there could indeed be self-interest, familiarity, and undue influence threats when differences of opinion in professional judgment occur within the firm, as noted in statement 4).