Audit independence in fact is most clearly lost when
A) A public accounting firm audits competitor companies in the same industry (e.g., Coca-Cola and Pepsi).
B) An auditor agrees to the argument of the client's financial vice president that deferring losses on debt refinancing is in accordance with generally accepted accounting principles.
C) An audit team fails to discover the client's misleading omission of disclosure about permanent impairment of asset values.
D) A public accounting firm issues a standard unqualified report, but the reviewing partner fails to notice that the assistant's observation of inventory was woefully incomplete.

Question

Quizplus · Accepted Answer

Audit independence is most clearly lost when the auditor agrees with the client's argument, as this suggests that the auditor is not exercising independent judgment and is instead being influenced by the client. This can compromise the objectivity and impartiality of the audit, which is a fundamental requirement for audit independence. Options A, C, and D are examples of other situations that could potentially compromise audit independence, but they are not as clear-cut as option B.

Audit Independence in Fact Is Most Clearly Lost When