The Adverse Interest Threat Exists When

question 2

Multiple Choice

The adverse interest threat exists when:

• A) A client sues its auditor for incompetence
• B) A CPA testifies in court, in response to a valid court subpoena, that it observed illegal activity taking place at the client's place of business
• C) A CPA voluntarily testifies in court that its client incorrectly recorded cash proceeds as nontaxable loan proceeds rather than as a taxable sale
• D) A CPA, in response to a formal SEC inquiry, states that it has serious concerns about the trustworthiness and candor of an audit client's CFO

---

Definitions:

Navigation Bar

A user interface element within software or websites that allows users to navigate or access different sections or functionalities efficiently.

Advanced

Pertaining to a higher or more complex level of features, functions, or capabilities, often in software or technical skills.

Financial Statements

Documents that provide an overview of a company's financial condition in both short and long term.

Statement of Cash Flows

A financial report that provides aggregated data regarding all cash inflows a company receives from its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given period.