Posted: March 29th, 2022
“Rule 101 – Independence ” would be impaired : Client litigation would impair independence unless litigation is not audit related and is immaterial in amount. In this case , the auditor failed to detect the inventory overstatement and which was material in amount. Client authorized its attorneys to explore the possibility of a lawsuit for damages. If the auditor or CPA firm are likely to be prosecuted, they may choose to comply with the company’s requirements to avoid paying the compensation. An
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