A Professional Accounting Firm Has Several Audit and Tax Clients;

question 13

Multiple Choice

A professional accounting firm has several audit and tax clients; however, a single client represents 40% of the firm's revenue. This situation could result in which of the following threats to professional independence?

• A) self-review
• B) intimidation
• C) advocacy
• D) familiarity
• E) self-interest

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Definitions:

Liquidation

The process of converting assets into cash or cash equivalents by selling them in the market.

Going Concern

An accounting assumption that a company will continue to operate for the foreseeable future, thus justifying the presence of its assets and liabilities.

Financial Restructuring

The process of reorganizing a company's financial structure, often involving re-negotiation of debts and equity, to improve its liquidity and ensure its survival.

WACC

The weighted average cost of capital, which is the average rate of return a company is expected to pay its security holders to finance its assets.