Question

A client company has not paid audit fees for its 2010 audit in which the audit report was dated March 15, 2011. According to the AICPA Code of Professional Conduct, for the auditor to be considered independent with respect to the 2011 audit, the 2010 audit fees must be paid before the

A. 2010 report is issued.
B. 2011 report is issued.
C. 2012 fieldwork is started.
D. 2011 fieldwork is started.

Answer 1

The 2010 audit fees must be paid before the 2011 audit report is issued to maintain independence according to the AICPA Code of Professional Conduct. Ensuring fees are paid beforehand mitigates any potential conflicts of interest.

Step-by-step explanation:

The question pertains to the independence of an auditor with respect to an audit year following the year in which audit fees have not been paid. According to the AICPA Code of Professional Conduct, an auditor must maintain independence in both fact and appearance when conducting an audit. If an auditor has outstanding audit fees from a prior year, this could impact their perceived independence for the current year's audit. Therefore, the correct answer is that for the auditor to be considered independent with respect to the 2011 audit, the 2010 audit fees must be paid before the 2011 report is issued (Option B). This ensures that no undue influence or financial obligation exists that could compromise the auditor's independence.