According to Interpretation 101-1,independence is impaired if the auditor has any direct or material indirect financial interest in the client.A direct financial interest includes
A)a material financial interest in a company associated with the client
B)stock ownership in the client
C)stock ownership in the client by a distant cousin
D)a loan to or from the client
E)an investment in a mutual fund that owns shares of stock in the company
F)both A and C
G)both B and D
H)both D and E

Question

Quizplus · Accepted Answer

A direct financial interest includes stock ownership in the client or a loan to or from the client. Therefore, choice G is the best answer as it includes both options. Choices A, C, and E are incorrect as they only include a material indirect financial interest. Choice F is incorrect as it includes A and C, both of which only include a material indirect financial interest but not a direct financial interest. Choice H is incorrect as it only includes a material indirect financial interest in an investment in a mutual fund.

According to Interpretation 101-1,independence Is Impaired If the Auditor Has