AFM202 Study Guide - Quiz Guide: Market Capitalization, External Auditor, Engagement Letter

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM202
• Professor: Alan Mc Naughton

Document Summary

Independence: the ability to act with integrity, objectivity, & professional skepticism (questioning mind) Lack of auditor independence impacts credibility & reliability of financial statements. Auditor must be, & be seen to be, independent. Additional requirements for public companies with market capitalization & a book value of total assets > million: Audit partner must be rotated off every 7 years, with a 5-year break from audit engagement. Audit committee must pre-approve all services provided to the client. Audit partners must not be directly compensated for selling non-assurance services to client. If engagement team member accepts employment in financial reporting role with client, firm must refrain from being auditor of client for one year form last filing. Auditor can be found negligent & liable for damages under tort law (civil court) if it is established that . There was a breach of duty of care. Loss was suffered as a consequence of that breach.