4. Comment( ethical or unethical)on the following computations of the auditor'sprofessional fee:a. 10% of the client's tax adjustmentb. 10% of the client's audited net incomec. waiving of professional fee5. What is the primary objective of the audit engagement letter? Give two(2) possiblereasons why the auditor should be initiating the audit engagement letter similar to pages27-28 Why should the audit engagement letter be renewed periodically?6. Luzon, Inc., a publicly held company wishes to engage J. Cruz, a CPA, to examine itsfinancial statements. Luzon was generally pleased with the services provided by its priorCPA, Dizon, but though the audit work performed was too detailed and interferedexcessively with Luzon's normal office routines, Cruz asked Luzon to inform Dizon ofthe decision to change auditors, but Dizon did not wish to do so.REQUIRED:Describe the three(3) kinds of written communications to be accomplished by thereceiving accountant to the existing accountant.b. Assuming Cruz decides to accept the engagement, list three(3) steps briefly that Cruzshould perform on this first time audit engagement in the following year.expected outputs.List three(3) beneficiaries if there is a freedom of communication between thepredecessor and successor auditors just like that of Dizon and Cruz. What are thea.Includeс.possible benefits?

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Answered: ethical or unethical) on the following…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Discuss and outline the requirements for "revenue recognition principles". What do you think the standard is designed to achieve? In your opinion is there any gap that the standard setter has not fully addressed
V2. If a lawyer refuses to furnish corroborating information regarding litigation, claims, and assessments. the auditor should: disclose this fact in a footnote to the financial statements. seek to obtain the corroborating information from management. C) consider the refusal to be a scope limitation. D) honor the confidentiality of the client-lawyer relationship.
What does a third-party user of financial statements have to prove under common law in a suit against an auditor for the auditor's negligence? Explain each item with an example
Which item regarding an Emphasis of Matter paragraph is true? a. The auditor will use the E of M to restrict distribution of the audit report. b. The auditor will use the E of M when the client has corrected an error in the previous financial statements. c. An E of M will be used when a material error exists in the current financial statements. d. The E of M paragraph is usually located immediately before the opinion paragraph. e. The E of M paragraph would be used to discuss a client's change in the method to estimate bad debts.
What types of actions may an auditor be liable to a client under common law? Why would the clients prefer to sue the auditor for tort action rather than a breach of contract?
Generally, the auditor could be legally liable under? Select one: a. contract law but not under the tort of negligence to third parties b. the tort of negligence to the client and contract law c. the tort of negligence but not contract law to the client d. contract law to third parties and to the client
What defenses are available to auditors against suits brought by clients under common law? Against suits brought by third parties under common law?
Explain the departures an auditor can award a client from an unqualified audit report.
What type of opinion is issued by the auditor if he or she is unable to determine the overall fairness of the financial statements?
Which of the following statements about materiality is considered true? a. Materiality is judged by the auditor using his professional knowledge and experience since materiality of an item varies with circumstances. b. Materiality could never influence the economic decisions of users taken on the basis of the financial information. c. The auditor should consider materiality but not its relationship with audit risk when conducting an audit. d. The size and nature of the item will not determine its materiality.
Is a member of an audit team required to disclose to a client that a commission will be received at the time the referral is being made under the “Commissions and Referral Fees Rule”? Yes or No
Which of the following would NOT typically be an appropriate base on which an auditor would determine materiality? O gross profit O net income before tax O total assets O total liabilities

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ethical or unethical) on the following computations of the auditor's fee: