A CPA's Financial Interests in Nonclients May Have an Effect

question 129

Multiple Choice

A CPA's financial interests in nonclients may have an effect on independence if the nonclients are investors in or investees of the client. Which situation would not impair a CPA's independence?

• A) The client has an immaterial investment in a nonclient investee in which the CPA has an immaterial investment.
• B) The CPA has a material indirect financial interest in a nonclient in which the client has a material investment.
• C) The client investor has a nonmaterial investment in the nonclient investee in which the CPA has a material investment.
• D) The CPA has a joint closely held investment with the client in a nonclient that is material to the client as well as the CPA.

---

Definitions:

Stagflation

An economic condition characterized by slow economic growth, high unemployment, and rising prices.

Full Employment

A state in an economy where all eligible workers who want to work at current wage rates can find employment, with no involuntary unemployment.

Recessions

Economic periods of decline characterized by falling GDP and increasing unemployment, often leading to reduced consumer spending and investment.

Recession

A period of temporary economic decline during which trade and industrial activities are reduced, often identified by a fall in GDP in two successive quarters.