Status as a "Covered Member" Is Important in Determining Independence

question 22

Multiple Choice

Status as a "covered member" is important in determining independence because CPAs who are classified as a "covered member" lack the independence to conduct an audit if:

• A) They have an indirect ownership interest in even a single share of stock outstanding in an audit client
• B) They refuse to subordinate their best judgment to the wishes of their client
• C) Their college-age, dependent child works in the client's warehouse during the summer as a shipping clerk
• D) Their sister is an attorney who works as the company's General Counsel

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Definitions:

Capabilities

A complex combination of people and processes that represent the firm's capacity to exploit resources that have been specially integrated to achieve a desired result.

Resources

Refers to all assets, capabilities, organizational processes, firm attributes, information, knowledge, etc., that a firm controls and can use to implement strategies and achieve its objectives.

Strategy Implementation

The process of putting plans, strategies, or policies into action to achieve strategic goals and objectives.

Strategic Plan

A long-term, overarching plan of action designed to achieve major goals and objectives within an organization.