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.

Convert fractions to decimal and percent equivalents.

Understand and apply basic principles of time value of money in financial calculations involving simple interest, compound interest, and effective rate calculations.

Solve problems involving investment calculations including present and future values.

Evaluate expressions involving multiple steps of arithmetic and algebraic manipulations.

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Definitions:

Tympanic Membrane

Also known as the eardrum, a thin membrane that vibrates in response to sound waves, initiating the process of hearing.

Malleus

A small bone in the middle ear that transmits sound vibrations from the tympanic membrane to the inner ear.

Semicircular Canals

Three fluid-filled tubes in the inner ear that help maintain balance by detecting rotations of the head.

Astigmatism

An imperfection in the curvature of the eye's cornea or lens, leading to blurred or distorted vision.