Which of the Following Statements Is FALSE When a PA

question 1

Multiple Choice

Which of the following statements is FALSE when a PA has an investment in a nonclient investor?

• A)This investment may be a direct or material indirect financial interest that will diminish independence with respect to a client investee.
• B)Independence is not impaired,as long as the PA does not have significant influence over the actions or financial statements of the nonclient investor.
• C)Independence is impaired when the PA's investment gives him or her significant influence over the actions of the nonclient investor,which might in turn influence the client investee.
• D)The independence of the PA is always impaired when a PA has an investment in a nonclient investor because it puts him or her in a position similar to that of a member of management of the client investee.

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Definitions:

Real Rate

The interest rate or rate of return on an investment after adjusting for inflation, representing the actual purchasing power of earnings.

Inflation Rate

This measures the percentage increase in the price level of goods and services in an economy over a period of time.

Risk-Free Rate

The return on an investment with no risk of financial loss, typically associated with government bonds.

Expected Inflation

The anticipated rate at which prices of goods and services will rise over a period.