In Accordance with the Independence Rule,an Ownership Interest in an Audit

question 21

Multiple Choice

In accordance with the Independence Rule,an ownership interest in an audit client is considered to be an indirect interest if:

• A) An auditor benefits from it, but cannot meaningfully influence or control it
• B) A partnership of which the auditor is a member owns the interest
• C) The benefits from the interest have accrued in the form of price appreciation but realization of this appreciation has not occurred
• D) An immediate family member owns the interest and shares the financial benefits of the interest with the auditor

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Definitions:

Dividends

Payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders.

Partial Equity Method

An accounting approach where an investor recognizes income from its investment in an associate to the extent of dividends received, differing from the full equity method which recognizes income as it's earned by the associate, regardless of dividends received.

Fair Value

The exchange value of an asset or the settlement cost of a liability in a well-arranged transaction with participants in the market on the measurement occasion.

Book Value

The net value of a company's assets minus its liabilities, often used as a measure of the company's worth.