Final answer:
The appropriate response is that it is not suitable for an audit firm to ask about an employee's personal investments unless it is directly relevant to the audit to avoid conflicts of interest. Auditors must maintain a balance between thoroughness and upholding privacy rights, adhering to ethical standards for independence and objectivity.Right option is B)
Step-by-step explanation:
Is it appropriate for an audit firm to ask questions of an employee about his or her investments or the investments of his or her spouse? The most suitable response to this question would be: No, unless directly relevant to the audit to avoid potential conflicts of interest. It's important to understand that while auditors need to have comprehensive information to perform their duties effectively, they must also respect the privacy of the individuals involved and adhere to ethical standards that protect confidential information.
Auditors are responsible for ensuring the accuracy and integrity of financial statements. When an auditor inquires about an employee's or an employee's spouse's investments, it must be directly related to ensuring that there are no conflicts of interest that could compromise the auditor's ability to perform an unbiased and objective audit. Such inquiries are governed by professional ethics and standards which aim to maintain auditor independence and objectivity.
These considerations offer a balance between the need for transparency in auditing practices and respect for individual privacy rights. If the information about personal investments could have a direct and material effect on the audit, questioning is justified. Otherwise, such inquiries would be inappropriate.