In which of the following circumstances would a CPA who audits XM Corporation lack independence?
A)The CPA and XM's president are both on the board of directors of COD Corporation.
B)The CPA and XM's president each owns 25 percent of FOB Corporation, a closely-held company.
C)The CPA has an automobile loan from XM, which is a savings and loan organization and the loan is collateralized by the automobile.
D)The CPA reduced XM's usual audit fee by 40 percent because XM's financial condition was unfavorable.

Question

Quizplus · Accepted Answer

The CPA would lack independence if they and XM's president each own 25 percent of a closely-held company, as this creates a mutual financial interest that could impair objectivity.

In Which of the Following Circumstances Would a CPA Who