A CPA Sole Practitioner Purchased Stock in a Client Corporation

question 29

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 would be considered a direct financial interest and,consequently,materiality is not a factor.
• B)Yes,because the stock would be considered an indirect financial interest that is material to the CPA's child.
• C)No,because the CPA would not be considered to have a direct financial interest in the client.
• D)No,because the CPA would not be considered to have a material indirect financial interest in the client.

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Definitions:

Common Standard Deviation

A measure used in the context of comparing groups that assumes all groups have the same standard deviation, often used in analyses such as ANOVA.

Common Population Variance

The hypothesis that two or more populations have the same variance.

ANOVA F Statistic

A statistic used in ANOVA (Analysis of Variance) tests to compare the means of three or more samples, indicating whether any significant differences exist.

Hypothesis Test

A method in statistics to determine if there's enough evidence in a sample of data to infer that a certain condition holds for the entire population.