A CPA Sole Practitioner Purchased Stock in a Client Corporation

question 37

Multiple Choice

A CPA sole practitioner purchased stock in a client corporation and placed it in a trust as an educational fund for the CPA's minor child. The trust securities were not material to the CPA but were material to the child's personal net worth. Would the independence of the CPA be considered to be impaired with respect to the client?

• A) Yes, because the stock is a direct financial interest.
• B) Yes, because the stock is an indirect financial interest that is material to the CPA's child.
• C) No, because the CPA does not have a direct financial interest in the client.
• D) No, because the CPA does not have a material indirect financial interest in the client.

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Definitions:

Taste Test

An experiment or survey in which individuals sample and evaluate the flavor of different food items or beverages.

Induction

A process of reasoning from specific cases to general principles or the formal introduction of a person into a position or organization.

Competitor's Product

A good or service offered by a business rival in the same market aiming to satisfy the same customer need or demand.

Persuade

To convince someone to do or believe something through reasoning or argument.