A CPA firm is comprised of 100 audit partners.Three of these partners own stock in one of the CPA firm's audit clients,with each such partner owning 2% of the outstanding shares in this client.Does this CPA firm retain the independence to audit this client?

Question

Quizplus · Accepted Answer

The ownership of shares in an audit client by a partner of the CPA firm creates a direct financial interest which may impair independence, regardless of the percentage of ownership. In this case, three of the audit partners own 2% of the shares each in the client, which is a significant ownership stake. As a result, the CPA firm does not retain independence to audit this client.

A CPA Firm Is Comprised of 100 Audit Partners