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1.Why would the owners of Lakeside as well as the company’s banks require that an independent
CPA firm perform the annual audit?The reason that there needs to be an independent auditoris so that they can remain unbiased. It could potentially make them less independent if they areauditing both Lakeside and the bank in which Lakeside is taking loans from. The auditing firmneeds to stay independent in mind and appearance and this may be an issue when auditingboth.

2.This case implies that no auditor with the firm of Abernethy and Chapman has an in-depthunderstanding of the consumer electronics industry. Is a CPA firm allowed to accept anengagement without having established the necessary expertise to oversee the audit?The firstgeneral standard of Generally Accepted Auditing Standards is that the auditor must haveformal education in auditing and accounting, adequate practical experience for the work beingperformed, and continuing professional education (Kursh, Lant, et Al, 2014, pgs. 32-33).Therefore they should not accept the engagement.Would the knowledge required to audit aconsumer electronics company differ significantly from that needed in the examination of a cardealership?The knowledge required to audit a consumer electronics company is significantlydifferent than that needed to audit a car dealership.Does the auditor have an obligation todiscuss his lack of expertise, or his plans to obtain the expertise with the client?The auditordoes have an ethical obligation to discuss his lack of expertise, as well as discussing if he planson hiring someone with expertise specifically for this client.

4. Rogers wants Abernethy and Chapman to assist his company in developing new accountingsystems. Does a CPA firm face an independence problem in auditing the output of systems thatthe same firm designed and installed?Yes, if a CPA firm were to develop new accountingsystems specifically for the company then they would lack the independence needed to testthem. Therefore

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