An Accountant and a Prospective Client Are Contemplating Entering into a Professional

question 14

Multiple Choice

An accountant and a prospective client are contemplating entering into a professional relationship in which the accountant will provide monthly bookkeeping services and annual tax return preparation services for this client's hair salon.The accountant's teenage daughter told this prospective client that her father is "an amazing accountant," which facilitated the professional introduction.The accountant's daughter works for this prospective client as a receptionist.In all likelihood,the accountant:

• A) May not provide services to this prospective client
• B) May provide only tax preparation services to this prospective client because a conflict of interest presently exists
• C) May provide only bookkeeping services to this prospective client because a conflict of interest presently exists
• D) May provide all requested services because a conflict of interest does not currently exist and is not reasonably foreseeable

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Definitions:

Transaction Motive

The need for cash to meet immediate and anticipated demands for payment, a key reason for holding cash in business.

Speculative Motive

The intention to hold cash or other assets in anticipation of future market fluctuations to gain financial advantages.

Collection Float

The time period between when a check is deposited and when the funds become available in the recipient's account, affecting the cash flow and liquidity.

Float Management

The practice of managing the time between when a check is deposited and when it clears, to optimize the use of funds.