Which of the Following Situations Would Be an Example of a Self-Interest

question 79

Multiple Choice

Which of the following situations would be an example of a self-interest threat that would prevent a PA from auditing the client?

• A)The PA's uncle owns the business that the PA is auditing.
• B)For the last two years,the client could not pay their fees,so the PA created a loan agreement covering the fees,with the client paying 10% interest on the fees.
• C)The PA has a small bank loan at normal business interest rates with the bank that his firm is auditing.
• D)The PA has purchased a used car from one of the employees of the client.

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Definitions:

Cash Equivalents

Short-term investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

Receivables

Amounts owed to a company by its customers or other parties for goods or services that have been delivered or used, but not yet paid for.

Income Statements

Financial statements that report a company's financial performance over a specific accounting period, detailing revenues, expenses, and profits.

Manage

The act of organizing, controlling, and overseeing resources or tasks to achieve specific goals.