An Oklahoma CPA Provides Management Advisory Services to a Large

question 13

Multiple Choice

An Oklahoma CPA provides management advisory services to a large public utility that provides electrical power throughout Oklahoma and is the only supplier of electricity to residential users in Oklahoma.The CPA has been asked to prepare a request for a utility rate increase that will be submitted to state regulators for their approval.The CPA:

• A) Has a conflict of interest that should be disclosed to his client
• B) Does not have to be concerned about conflicts of interest because the CPA only provides management advisory services
• C) Does not have to be concerned about conflicts of interest because utility rates ultimately will be set by independent state regulators
• D) Does not have a material conflict of interest because the requested rate increase will apply to all Oklahoma citizens who use this utility's electricity services

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Definitions:

Say's Law

An economic principle that asserts that supply creates its own demand, meaning that production of goods and services creates an equal amount of demand for those goods and services.

Classical Economics

Laissez-faire economics. Our economy, if left free from government interference, tends toward full employment. The prevalent school of economics from about 1800 to 1930.

Fiscal Policy

Manipulation of the federal budget to attain price stability, relatively full employment, and a satisfactory rate of economic growth.

Recessions

Periods of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.