Under Which of the Following Circumstances Would the Independence of a CPA

question 24

Multiple Choice

Under which of the following circumstances would the independence of a CPA be considered impaired if the CPA, who also is an attorney, serves as auditor and provides legal services to the same private client?

• A)When the CPA, as legal agent, consummates a business acquisition for the client.
• B)When the CPA's audit fees and legal fees are not billed separately.
• C)When the CPA uses legal expertise to research a question of income tax law.
• D)When the legal services consist of an analysis of the terms of an existing lease agreement.

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Definitions:

Stock Dividend

Distribution of additional shares of a company's stock to its shareholders instead of cash.

Stock Split

A corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares.

Retained Earnings

The portion of net income that is retained by a company rather than distributed to its shareholders as dividends.

Common Stock Dividend Distributable

A liability account on the balance sheet representing a declaration of dividends by a company's board of directors that have not yet been paid out to shareholders.