Question

An audited entity company has not paid its 2013 audit fees. According to the AICPA code of professional conduct, for the auditor to be considered independent with respect to the 2014 audit, the 2013 audit fees must be paid before the:

a) 2014 audit report issuance date
b) End of the fiscal year 2014
c) 2013 financial statements are issued
d) Beginning of the 2014 audit fieldwork

Answer 1

For an auditor to maintain independence according to the AICPA Code of Professional Conduct, unpaid fees from previous audits must be settled before the issuance date of the current year's audit report to prevent any conflict of interest.

Step-by-step explanation:

According to the AICPA Code of Professional Conduct, for an auditor to be considered independent with respect to the 2014 audit, the 2013 audit fees must be paid before the 2014 audit report issuance date. This requirement is vital as unpaid fees from previous audits could be seen as an impairment to independence, as they might be considered a loan from the client to the audit firm, which is prohibited. The payment must occur before issuing the current year's audit report to ensure there is no appearance of a mutual interest between the auditor and the audited entity.