Generally, loans between an audit firm or a member of the firm and an audit client are prohibited because they create a financial relationship. Which of the following is not an exception to this rule?

Question

Quizplus · Accepted Answer

Loans between an audit firm or a member of the firm and an audit client are generally prohibited because they create a financial relationship that could impair independence. Exceptions to this rule include home mortgages (B), loans fully collateralized by cash deposits at the same financial institution (C), and automobile loans (D) made under normal lending procedures, as these are considered to not impair independence if they are made under conventional terms. Unsecured loans guaranteed by the audit client (A) do not fall under these exceptions and would impair the auditor's independence.

Generally, Loans Between an Audit Firm or a Member of the Firm