Golden & Co., CPAs, have provided annual audit and tax compliance services to Mare Corp. for several years. Mare has been unable to pay Golden in full for services Burrow rendered 19 months ago. Golden is ready to begin fieldwork for the current year's audit. Under the ethical standards of the profession, which of the following arrangements will permit Burrow to begin the fieldwork on Mare's audit?
A. Mare gives Golden an 18-month note payable for the full amount of the past due fees before Golden begins the audit.
B. Mare sets up a two-year payment plan with Golden to settle the unpaid fee balance.
C. Mare commits to pay the past due fee in full before the audit report is issued.
D. Mare engages another firm to perform the fieldwork, and Golden is limited to reviewing the workpapers and issuing the audit report.
Choice "C" is correct. Under Rule 101 of the Code of Professional Conduct regarding independence, a member's independence is impaired with respect to a client who is more than one year overdue in the payment of professional fees. An attestation engagement, such as an audit, requires independence of mind and in appearance. Fees from prior work must be paid in full before the issuance of a report on the following year's work.
Choices "B" and "A" are incorrect. Neither of these answers would provide for the fees to be paid before the issuance of the report on the current year financial statements.
Choice "D" is incorrect. Burrow would not accept an engagement of this type, and the fees related to the prior year work would not be paid before the issuance of the current year report.