Question

Independence in fact means that a third party with knowledge of the auditor's relationship with the client would consider the auditor to be independent whereas independence in appearance means the auditor is unbiased and objective.

a. True
b. False

Answer 1

The statement about auditor independence is false because it incorrectly describes independence in appearance; independence in fact is the actual objectivity of the auditor, while independence in appearance is the external perception of objectivity. Statements 94, 95, and 96 regarding statistical tests are addressed with 94 being false and 95, 96 being true.

Step-by-step explanation:

The statement regarding independence in fact and independence in appearance is partially incorrect. Independence in fact refers to the actual independence of the auditor, meaning the auditor is objectively capable of performing the audit without being influenced by relationships or other factors. On the other hand, independence in appearance is the perception by knowledgeable third parties that the auditor is not subject to influences that would compromise their objectivity. In this context, the statement is false because it incorrectly describes independence in appearance as the auditor being unbiased and objective, which is actually the definition of independence in fact.

Regarding the numbered statements:

• Statement 94 is false. The number of degrees of freedom for a test of independence is not equal to the sample size minus one. It is actually calculated based on the number of categories minus one for each variable.
• Statement 95 is true. The test for independence indeed uses tables of observed and expected data values.
• Statement 96 is true. A test for independence is the appropriate statistical test to determine if there is a relationship between the college or university a student chooses and their socioeconomic status.