A CPA Sole Practitioner Purchased Stock in a Client Corporation

question 29

Multiple Choice

A CPA sole practitioner purchased stock in a client corporation and placed it in a trust as an educational fund for the CPA's minor child.The trust securities were not material to the CPA but were material to the child's personal net worth.Would the independence of the CPA be considered to be impaired with respect to the client?

• A)Yes,because the stock would be considered a direct financial interest and,consequently,materiality is not a factor.
• B)Yes,because the stock would be considered an indirect financial interest that is material to the CPA's child.
• C)No,because the CPA would not be considered to have a direct financial interest in the client.
• D)No,because the CPA would not be considered to have a material indirect financial interest in the client.

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Definitions:

Mining Acquisition Rights

Rights or licenses obtained by a company to explore or extract mineral resources from a specific area.

Pre-exploration Survey

The initial analysis or evaluation conducted to gather information about a possible mineral, oil, or gas site before starting exploration activities.

AASB 116

Refers to the Australian Accounting Standards Board Standard 116, which outlines the accounting treatment for property, plant, and equipment, emphasizing recognition, measurement after recognition, and depreciation.

Property, Plant and Equipment

Long-term tangible assets used in the operation of a business and not intended for immediate sale.