Reference no: EM132824584

Problem 1: KPMG had been the audit partners for Xerox for 30 years, rotated the audit partners and covered members and had an office near Xerox headquarters where the audit partners met regularly with Xerox financial officials and attended meetings of the audit committee. KPMG had access to internal financial information and audited Xerox's publicly reported financial statements. KPMG repeatedly expressed serious concerns or asked for correction to Xerox Financial Statements but under pressure from Xerox's management ignored the material problems that had been identified in issuing audit reports and even overlooked Xerox's earnings manipulations in order to keep their lucrative client. KPMG received $26M in audit fees and $56M in non-audit services. Which of the below of the seven threats to independence was not present in the facts from the Xerox presentation?

a. The Undue Influence Threat

b. the Self Interest Threat

c. Self -Review Threat

d. Familiarity Threat

e. All of the above were present

Problem 2: Which of the following is not an "insider" or "temporary insider" assuming no access to material nonpublic information, for definitional purposes of the insider trading rules?

a. An internal auditor

b. An independent member of the Board of Directors who does not own any company stock

c. A shareholder who owns 11% of a company's stock and her husband owns 2% of the company's stock

d. An investor who owns 20% of the company's outstanding shares

e. An investor who owns 15% of the company's outstanding general obligation bonds that are trading at a price roughly equal to their market value