Julie Webb, CPA Takes Out an Automobile Loan with First

question 47

Multiple Choice

Julie Webb, CPA takes out an automobile loan with First national Bank of Wellville (FNBW) while attending the University of Wellville. Julie graduates one year later and is hired as an auditor by Best and Driftwood, LLP. Her first assigned audit engagement is with First national Bank of Wellville, a client of Best and Driftwood. As a new audit assistant, Julie continues to pay her automobile loan payments each month. According to the AICPA, why is Julie is considered a covered member for FNBW independence purposes?

• A) She will be working on the engagement.
• B) She has a direct financial interest in FNBW.
• C) She graduated in the same area as the client is operating.
• D) She has an immaterial direct financial interest in FNBW.

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Definitions:

Contribution Margin

The difference between a product's selling price and its total variable costs, which helps cover fixed costs and create profit.

Net Operating Income

The profit generated from a company's core business operations, excluding deductions for interest and taxes.

Contribution Approach

An accounting method where all variable costs are subtracted from sales to find the contribution margin, which is then used to cover fixed costs and profits.

Cost Formula

An equation used to predict costs, often relating total costs to the level of activity or volume of output.