Pam is a licensed CPA; her husband, Greg, is a major shareholder in a corporation audited by Pam's firm.If Pam is involved in the audit of that firm:
A)She will likely be in violation of at least one of the "general" GAAS.
B)She will likely be in violation of at least one of the "field work" GAAS.
C)She will likely be in violation of at least one of the "reporting" GAAS.
D)Its stock price will change due to the related party transaction.

Question

Quizplus · Accepted Answer

According to the AICPA's Code of Professional Conduct, it is a violation of the independence standard for a CPA to provide audit services to a client if the CPA has a close relationship with an individual in a position to exert influence over the client. In this case, Pam's husband's status as a major shareholder qualifies as a close relationship that could impair Pam's independence, and therefore puts her in violation of the "general" GAAS.

Pam Is a Licensed CPA; Her Husband, Greg, Is a Major