Which of the Following Is Allowable for a CPA

question 29

Multiple Choice

Which of the following is allowable for a CPA?

• A) A used car loan from a banking client where the client has a lien on the car.
• B) An uncollateralized signature loan from a client.
• C) Owning more than five percent of the outstanding shares of client stock in a retirement account.
• D) The audit engagement partner serves on the client's audit committee.

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Definitions:

Liquidity Problems

Situations where an entity faces difficulty in converting assets into cash or meeting its short-term obligations.

General Ledger

A comprehensive record of all financial transactions of a company, categorized into accounts.

Accounting Equation

A fundamental principle in accounting that states that assets equal liabilities plus equity (Assets = Liabilities + Equity), serving as the foundation for the balance sheet.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations, calculated as current assets divided by current liabilities.