Question

The sec has historically raised questions regarding the independence of firms that derive a significant portion of their total revenues from one audit client or group of clients because the sec staff believes this situation causes cpa firms to

Answer 1

Answer:

have mutuality of interest with the client or group of clients.

______❤️

Answer 2

The SEC has historically raised questions regarding the independence of firms that derive a significant portion of their total revenues from one audit client or group of clients because the SEC staff believes these situations causes CPA firms to;

a) Profit excessively from a client or group of clients.

b) depend too heavily on the fees generated by the client or the clients.

c) have mutuality of interest with the client or group of clients.

d) place too heavy a burden on the client's financial position

ANSWER:  b) depend too heavily on the fees generated by the client or the clients

Explanation:

• This is because the practitioner may be in a position of weakness since the client can always threaten to cancel its contract. This weakness compromises the auditor's independence as a result.
• Independence is an individual characteristic that is an integral component of professionalism and professional behaviour. This applies to avoiding undue attention and being free from limits which would prohibit taking the right course of action.
• For example, if the auditor is a client's long-time friend, he might not be sufficiently of the client . Since an auditor is responsible for behaving on behalf of the shareholders and not of the client, the client relationship will undermine the ability of the auditor to represent successful shareholders 'interests. The auditor can not be as comprehensive as it should be, or he may be persuaded to give the client the benefit of doubt when he should not be doing so.

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