The Advocacy Threat to Independence Exists When

question 11

Multiple Choice

The advocacy threat to independence exists when:

• A) A member of an auditing firm publicly speaks out on behalf of his client
• B) A member of an auditing firm makes a clear recommendation to the client
• C) A member of an auditing firm makes a recommendation to a client that is skewed in favor of a particular position or outcome
• D) A member of an auditing firm confronts an audit client and expresses an opinion that results in a significant disagreement with the client

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Definitions:

Quiet Period

A mandated time frame where promotional or public communications by a company are restricted by regulatory authorities before an IPO.

SEC

The U.S. Securities and Exchange Commission, a federal agency responsible for enforcing federal securities laws and regulating the securities industry.

Cumulative Voting

A method of electing boards of directors in which stockholders can cast all of their votes for a single seat. Enables minority interests to get at least some representation on the board.

Minority Stockholders

Minority stockholders are investors who own a smaller portion of a company's shares and typically do not have control or significant influence over the company's decisions.