Question

Company owes Jay CPAs $25,000 for previously rendered tax and consulting services. The fees have been outstanding for more than one year, and Jay asks Jay to perform this year's audit but is unable to pay the fees prior to release of the audit report. Which threat to compliance with the ICPA independent rules applies to the situation?

a. Independence threat
b. Integrity threat
c. Objectivity threat
d. Confidentiality threat

Answer 1

The threat to compliance with the ICPA independent rules that applies to the situation is a) Independence threat.

Step-by-step explanation:

The threat to compliance with the ICPA independent rules that applies to the situation is Independence threat.

Independence threat arises when there is a risk that the auditor's objectivity and independence will be compromised. In this scenario, the company owes Jay CPAs $25,000 for previously rendered services, and they want Jay to perform this year's audit. However, Jay is unable to pay the fees before the audit report is released, which may compromise the independence of Jay CPAs.

It is important for auditors to maintain their independence to ensure the credibility and reliability of the audit process. If an auditor has a financial interest in the client, it can raise concerns about their objectivity and ability to provide an unbiased opinion.