Question

Identify an activity that may not affect independence of mind but is likely to affect independence in appearance.

a. Payment of high audit fees dependent upon profitable financials.
b. Engagement of the CPA and payment of audit fees by a third party.
c. Dependence upon a client for a large percentage of audit fees.
d. Ownership of an immaterial indirect financial interest in the audited client.
e. Performance of valuation services and actuarial services for the same company.

Answer 1

c. Dependence upon a client for a large percentage of audit fees.

Step-by-step explanation:

The independence in appearance means that the auditor integrity, objectivity is compromised and the people have the faith in the auditor and it is based on the other interpretation

While on the other hand, the independent of mind means the auditor is fully independent and unbiased for taking the decisions

Therefore according to the given options, the option c is correct as the appearance of independent is impacted due to the more percentage in the audit fees