5. A CPA purchased stock in a client corporath educational fund for the CPA's minor child. The trust securities were not materiai to the CPA but was material to the child's personal net worth. Would the independence of the CPA be considered impaired with respect to the client? a. No, because the CPA would not be considered to have direct financial interest in the client. b. No, because the CPA would not be considered to have a material indirect financial interest in the client. C. Yes, because the stock would be considered a direct financial interest and consequently materiality is not a factor. d. Yes, because the stock would be considered an indirect financial interest that is material to the CPA's child.
5. A CPA purchased stock in a client corporath educational fund for the CPA's minor child. The trust securities were not materiai to the CPA but was material to the child's personal net worth. Would the independence of the CPA be considered impaired with respect to the client? a. No, because the CPA would not be considered to have direct financial interest in the client. b. No, because the CPA would not be considered to have a material indirect financial interest in the client. C. Yes, because the stock would be considered a direct financial interest and consequently materiality is not a factor. d. Yes, because the stock would be considered an indirect financial interest that is material to the CPA's child.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:5. A CPA purchased stock in a client corporation and placed it in trust as an
educational fund for the CPA's minor child. The trust securities were not
materiai to the CPA but was material to the child's personal net worth. Would
the independence of the CPA be considered impaired with respect to the client?
a. No, because the CPA would not be considered to have direct financial
interest in the client.
b. No, because the CPA would not be considered to have a material indirect
financial interest in the client.
C. Yes, because the stock would be considered a direct financial interest and
consequently materiality is not a factor.
d. Yes, because the stock would be considered an indirect financial interest
that is material to the CPA's child.
6. The code of ethics would most likely be considered to have been violated when
the CPA represents that specific c onsulting services will be performed for a
a stated fee and it is apparent at the time of representation that the
a. Actual fee would be substantially higher.
b. Actual fee would be substantialiy lower than the fee charged by other
CPAS for comparable service.
c. CPA would not be independent.
d. Fee was a competitive bid.
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