A CPA Firm Is Comprised of 100 Audit Partners

question 35

Multiple Choice

A CPA firm is comprised of 100 audit partners.Three of these partners own stock in one of the CPA firm's audit clients,with each such partner owning 2% of the outstanding shares in this client.Does this CPA firm retain the independence to audit this client?

• A) Yes, as long as none participate in the audit as the primary or concurring partner
• B) Yes, as long as none render non-audit services to this client
• C) Yes, as long as none is a "covered member' with respect to this client
• D) No

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Definitions:

Economic Profits

The gap between total income and the sum of all costs, covering both direct and indirect expenses.

Total Revenue

The entire amount of income generated by the sale of goods or services before any expenses are deducted.

Opportunity Cost

The value of the next best alternative forgone as a result of making a decision to pursue a certain action.

Economic Efficiency

The optimal distribution of resources in a manner that maximizes the total utility to all individuals in the economy.