A CPA Sole Practitioner Purchased Stock in a Client Corporation

question 37

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 is a direct financial interest.
• B) Yes, because the stock is an indirect financial interest that is material to the CPA's child.
• C) No, because the CPA does not have a direct financial interest in the client.
• D) No, because the CPA does not have a material indirect financial interest in the client.

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Definitions:

Standard Labor Cost

The predetermined cost of labor that is expected for manufacturing a product or performing a service, used for budgeting and performance evaluation purposes.

Direct Labor Rate Variance

The difference between the actual cost of direct labor and the standard cost expected, used to assess labor cost efficiency.

Produced Units

Produced units refer to the quantity of goods manufactured or completed in a given period, indicating the production output level.

Data Period

A specified duration of time for which data is gathered and analyzed.