A CPA Recently Inherited $400,000 of Stock Outstanding in One

question 27

Multiple Choice

A CPA recently inherited $400,000 of stock outstanding in one of her audit clients.In an attempt to maintain her independence,she placed her holdings of this audit client's stock into a trust.The trust is managed by a well-known independent trustee,JP Bankers Trust Services.The CPA's two young children are the sole beneficiaries of this trust.The CPA:

• A) Successfully has maintained her independence because none of the trust's assets directly benefit her
• B) Successfully has maintained her independence because she does not have control of these assets
• C) Has not maintained her independence because of the serious self-review threat presented
• D) Has not maintained her independence because she still is considered to have an interest in her audit client

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Definitions:

Comparative Advantage

The ability of a country or firm to produce a particular good or service at a lower opportunity cost than its competitors.

Absolute Advantage

The ability of an entity to produce more of a good or service with the same amount of resources than another entity.

Opportunity Cost

The price paid for not selecting the best available alternative when deciding.

Bushel

A unit of volume that is used primarily in the United States to measure agricultural commodities, equivalent to approximately 35.24 liters.