Auditing and Assurance Services 1st Edition by Iris Stuart

Exercise 19

A CPA purchases stock in an audit client corporation and placed it in an educational trust for the CPA's minor child. The trust securities were not material to the CPA but were material to the child's personal net worth. Is the CPA's independence considered to be impaired with respect to the client
a. Yes, because the stock is considered a direct financial interest and, consequently materiality is not a factor.
b. Yes, because the stock is considered an indirect financial interest that is material to the CPA's child.
c. No, because the CPA is not considered to have a direct financial interest in the client.
d. No, because the CPA is not considered to have a material indirect financial interest in the client.