In Evaluating a Firm's Independence with Respect to a Prospective

question 3

True/False

In evaluating a firm's independence with respect to a prospective audit client, it is not necessary to consider whether acceptance of the client would result in any conflicts of interest with other clients.

---

Definitions:

Prepaid Expenses

Prepaid expenses represent payments made in advance for goods or services to be received in the future, recorded as assets on the balance sheet until they are consumed or used.

Operating Activities

Transactions and events related to the primary business activities, such as selling products or services, which are reflected in the cash flows.

Investing Activities

Transactions involving the purchase and sale of long-term assets and other investments, not including cash equivalents.

Common Stock

A type of equity ownership in a corporation, representing claims on a portion of its earnings and assets, with voting rights on corporate matters.