Correct Answer: A

Explanation: In this problem, the occurrence rate of 3% and the other factors indicated call for a sample of 400. If the occurrence rate is made smaller, then the sample would decrease and the only possible answer would be 200.

Today's question: REG

A violation of the profession's ethical standards most likely would have occurred when a CPA _________________

A)   issued an unqualified opinion on the 2009 financial statements when fees for the 2008 audit were unpaid.

B)   recommended a controller's position description with candidate specifications to an audit client.

C)   purchased a CPA firm's practice of monthly write-ups for a percentage of fees to be received over a three-year period.

D)   made arrangements with a financial institution to collect notes issued by a client in payment of fees due for the current year's audit.

B)

Correct Answer: A

Explanation: Under Rule 101 of the Rules of Conduct as interpreted, independence is impaired if there is a direct financial interest in an audit client regardless of materiality. Specifically independence is impaired if audit fees remain unpaid for more than one year prior to the date of the current year's report. It is considered a loan.

The remaining answer choices are incorrect for the following reasons:

• Independence is not impaired by merely recommending a job position including candidate specifications. However, independence would be +impaired if the CPA actually did the hiring of the controller because this would be management.
• There is no prohibition against purchase of a CPA firm's monthly write-ups for a percentage of fees.
• A CPA may make arrangements with a bank to collect notes issued by a client in payment for a fee that is due.