Practice question from Core Regulation: REG Mastery
Which of the following impairs a CPA's independence when performing an audit? A. The CPA's spouse owns any amount of stock in the audit client B. The CPA has a fully collateralized loan from the audit client C. The CPA provides tax preparation services to the audit client D. The CPA's adult non-dependent child works in a non-key position at the audit client E. The CPA has an automobile loan from the audit client with normal lending terms
Answer
A
Explanation
Independence is impaired when an immediate family member (spouse, dependent) has a direct financial interest in an audit client, regardless of the amount. Even $1 of stock ownership by a spouse impairs independence. Automobile loans with normal terms and fully collateralized loans are permitted exceptions. Tax services don't impair independence (only attest services require independence). Non-dependent children in non-key positions don't impair independence.