Which of the Following Loans Would Be Prohibited Between a CPA

question 57

Multiple Choice

Which of the following loans would be prohibited between a CPA firm or its members and an audit client?

• A) automobile loans
• B) loans fully collateralized by cash deposits at the same financial institution
• C) new home mortgage loans
• D) unpaid credit card balances not exceeding $10,000 in total

---

Definitions:

Emergency Needs

Financial requirements that arise unexpectedly and require immediate attention, often relating to health, home repairs, or urgent personal matters.

Chattel Mortgage

A loan arrangement in which personal movable property is used as security for the loan, and the lender holds a mortgage over the chattel.

Trust Receipts

Documents that acknowledge the receipt of goods that are held in trust for the lender until the loan associated with the goods is paid.

Blanket Lien

A type of lien that gives the creditor the rights to seize nearly all types of assets and property of the debtor in the event of default.