How is a CPA firm insulated from being pressurized by management?
A) The audit committee approves hiring, firing, and paying fees to external auditors.
B) The chairman of the board approves the external auditor's fees as well as the engagement letter.
C) The IRS approves the external auditor's fees as well as the engagement letter.
D) The CPA firm is not insulated from management.

Question

Quizplus · Accepted Answer

The audit committee, composed of independent board members, approves the hiring of external auditors, pays their fees, and oversees the audit process. This provides a layer of insulation for the CPA firm as they do not have to worry about being pressured by management to overlook any financial discrepancies. The other options are incorrect as they do not provide any insulation to the CPA firm.

How Is a CPA Firm Insulated from Being Pressurized by Management