I'm having a hard time figuring out the answer to these problems below. Do you know how it works?
1. would independence be impaired if you engage with an audit client who has a partner from your firm as a board committee member? this partner would have no visibility or influence into the audit.
2. would independence be impaired if your spouse is the administrative assistant to the CEO of your audit client?
3. are you allowed to use a specialist provided by the client?
4. during sample testing, the aggregate exceptions found in inventory exceeds performance materiality, but not materiality to the F/S as a whole. is that considered a material misstatement (leading to a qualified/adverse opinion) and/or require a disclosure/note added to your audit report?
In my opinion, #1 and # 2 is not recommended, even if they have no visibility or influence. The reasoning is — too often we see lawsuit like this.
#1 – No I do not think independence would be impaired because the committee member is not considered to be a covered member of the audit and have no influence.
#2 – Very high chance yes. The law often consider your spouse as a covered member, and your spouse is working for your client, your spouse is earning $ which translate to having a beneficial influence to alternate the results (to benefit the company, which will benefit her).
#3 – This question depends on rather the specialist is independent from the client, and how influence his opinion will be in the audit.
#4 – I have no experience in this, but my opinion will be — it depends if this material misstatement will lead to the report reader to generate misleading financial decision. Like if this misstatement will be a key factor to determine a future project / contract / funds, etc. If it will… then it will almost always be a qualified / adverse opinion (to protect the auditor).