A CPA's financial interests in nonclients may have an effect on independence if the nonclients are investors in or investees of the client. Which situation would not impair a CPA's independence?
A) The client has an immaterial investment in a nonclient investee in which the CPA has an immaterial investment.
B) The CPA has a material indirect financial interest in a nonclient in which the client has a material investment.
C) The client investor has a nonmaterial investment in the nonclient investee in which the CPA has a material investment.
D) The CPA has a joint closely held investment with the client in a nonclient that is material to the client as well as the CPA.

Question

Quizplus · Accepted Answer

Option A is the only scenario where the financial interests of the client and nonclient do not impair the independence of the CPA. Both the investments are immaterial, so there is a low risk of financial influence or bias. In all the other options, there is a higher risk of financial influence that could jeopardize the CPA's independence.

A CPA's Financial Interests in Nonclients May Have an Effect