A CPA sole practitioner purchased stock in a client corporation and placed it in a trust as an educational fund for the CPA's minor child. The trust securities were not material to the CPA but were material to the child's personal net worth. Would the independence of the CPA be considered to be impaired with respect to the client?

Question

Quizplus · Accepted Answer

BThe CPA's independence is considered to be impaired both because the stock represents a direct financial interest owned by the CPA (even though it is placed in a trust for the CPA's minor child) and because it is an indirect financial interest that is material to the CPA's child. Independence rules require that CPAs avoid both direct and material indirect financial interests in audit clients to maintain objectivity and impartiality.

A CPA Sole Practitioner Purchased Stock in a Client Corporation