ExpertCPA · Question 01 · Area I: Ethics & General Principles
An auditor is performing an audit of a nonissuer's financial statements. During the engagement, the auditor encounters a situation involving a threat to compliance with the Integrity and Objectivity Rule of the AICPA Code of Professional Conduct. The threat is not explicitly addressed by the Code's rules or interpretations. According to the Conceptual Framework for Members in Public Practice, which of the following steps should the auditor take FIRST?
An auditor is performing an audit of a nonissuer's financial statements. During the engagement, the auditor encounters a situation involving a threat to compliance with the Integrity and Objectivity Rule of the AICPA Code of Professional Conduct. The threat is not explicitly addressed by the Code's rules or interpretations. According to the Conceptual Framework for Members in Public Practice, which of the following steps should the auditor take FIRST?
Answer options:
Apply safeguards to eliminate the threat or reduce it to an acceptable level.
Identify the threat and evaluate whether the threat is at an acceptable level.
Consult with legal counsel regarding the potential litigation risk associated with the threat.
Document the threat and the auditor's conclusion that independence is impaired.
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