Which of the following statements regarding financial statement audits are correct? Multiple select question.The audit fee may not be based on the outcome of the audit.Auditors can own stock in the companies they audit.Auditors must be CPAs.The auditor may be an employee of the company being audited.Need help? Review these concept resources.
Question
Which of the following statements regarding financial statement audits are correct? Multiple select question.The audit fee may not be based on the outcome of the audit.Auditors can own stock in the companies they audit.Auditors must be CPAs.The auditor may be an employee of the company being audited.Need help? Review these concept resources.
Solution
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The audit fee may not be based on the outcome of the audit: This statement is correct. According to the AICPA's Code of Professional Conduct, the audit fee should not be contingent on the outcome of the audit. This is to ensure the auditor's independence and objectivity.
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Auditors can own stock in the companies they audit: This statement is incorrect. Auditors are required to be independent in fact and appearance. Owning stock in a client company would be a conflict of interest and impair the auditor's independence.
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Auditors must be CPAs: This statement is correct. In the United States, financial statement auditors must be Certified Public Accountants (CPAs). This is a requirement set by the American Institute of Certified Public Accountants (AICPA).
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The auditor may be an employee of the company being audited: This statement is incorrect. An external auditor cannot be an employee of the company being audited as it would impair their independence. However, a company can have internal auditors who are employees of the company. But their role is different from that of an external auditor.
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