ExpertMedium1 markMultiple Choice
CPA · Question 32 · Area I: Ethics & General Principles
Under the AICPA Code of Professional Conduct, which of the following situations would NOT impair a covered member's independence?
Under the AICPA Code of Professional Conduct, which of the following situations would NOT impair a covered member's independence?
Answer options:
A.
The covered member's spouse is employed by the client as the Director of Internal Audit.
B.
The covered member owns 1% of the client's outstanding shares.
C.
The covered member has an automobile loan from a client financial institution that is fully collateralized by the automobile.
D.
The covered member is a trustee of a trust that owns 10% of the client's stock.
How to approach this question
Recall the 'permitted loans' exceptions. Auto loans (collateralized), Passbook loans, Credit cards <$10k.
Full Answer
C.The covered member has an automobile loan from a client financial institution that is fully collateralized by the automobile.✓ Correct
The covered member has an automobile loan from a client financial institution that is fully collateralized by the automobile.
AICPA independence rules allow specific types of loans from client financial institutions, provided they are obtained under normal lending procedures, terms, and requirements. Automobile loans collateralized by the vehicle are one of these permitted exceptions.
Common mistakes
Thinking all loans impair independence.
Practice the full CPA AUD Practice Exam 3
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