Answer:1 - c - clearly violated the independence requirement.
Independence requirement is clearly violated in this case as David Friehling, his firm and his family members had substantial interest in Madoff securities.
David Frieling, as an auditor would lack independence even if his relative holds a substantial interest in the audit concern. The term relative includes the lineal ascendants and descendants of spouse also. Therefore, Frieling's independence as an auditor would be affected even though most of the money was invested by his father in law.
Also it cannot be concluded that there is no breach of independence in fact as there is nothing mentioned in the case which proves the auditor's unbiased state of mind.
Answer: 2 - a - Gross negligence to the infinite exponent.
Being an auditor, David Friehing should have been aware of the fact that auditing a concern in which he holds substantial interest would arose doubts with regard to his independence and thereby would reduce the reliability over his audited reports.
Therefore the decision of David Friehing to audit the Madoff Securities in which he holds substantial interest is considered to be the gross negligence to the infinite exponent.
Answer: 3 - c - The fact that Madoff securities was audited by a single individual.
David Friehing substantial interest in Madoff securities is more likely to compromise his independence. There are chances that the reports certified by him may not include the real fact figures and information.
Which of the following is true given the fact that David Friehling, his firm and his...
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