In Which of the Following Circumstances Would a CPA Who

question 32

Multiple Choice

In which of the following circumstances would a CPA who audits XZ Corporation lack independence?

• A) The CPA and XZ's president are both on the board of directors of COD Corporation.
• B) Both the CPA and XZ's president own 25 percent of FOB Corporation, a closely held company.
• C) The CPA has an automobile loan from XZ, a financial institution. The loan is collateralized by the automobile.
• D) The CPA reduced XZ's usual audit fee by 40 percent prior to the audit because XZ's financial condition was unfavorable.

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Definitions:

Least Squares Method

A mathematical technique used in regression analysis to minimize the sum of the squares of the differences between observed and predicted values.

Sum of Squares

A statistical measure that quantifies the total deviation of data points from their mean, often used in variance and standard deviation calculations.

Coefficient of Correlation

A statistical measure that calculates the strength and direction of the relationship between two variables.

Linear Relationship

A type of correlation where there is a constant rate of change between two variables.