Question

Ms. Zadina is being considered for promotion to partner at her CPA firm. Her sister is the controller for Firm A, which is audited by Ms. Zadina’s CPA firm. Because of potential independence issues, Ms. Zadina does no work for Firm A. Ms. Lembke works in the same office as Ms. Zadina and is the managing partner of the CPA firm. Ms Lembke is also the lead partner on the CPA firm's largest client, Firm A. Which of the following things would most likely occur if Ms. Zadina is promoted?

Group of answer choices:

a. Ms. Zadina will have to move to another office (i.e., city) or her CPA firm will no longer be able to provide attestation services its largest client.

b. Ms. Zadina will be allowed to serve as the partner overseeing the audit of Firm A.

c. Ms. Zadina will be in a better position to win a consulting engagement from Firm A.

d. Ms. Zadina’s CPA firm will no longer be able to provide services to its largest client.

Answer 1

a. Ms. Zadina will have to move to another office (i.e., city) or her CPA firm will no longer be able to provide attestation services its largest client.

Explanation:-

Interpretation 101-1 of the AICPA Rules of Conduct states that all partners of a firm must be independent of any attestation clients of the firm. Therefore, if Ms. Zadina is promoted to partner, CPA firm would no longer be able to provide attestation services to Firm A. If Ms. Zadina is promoted, she will have to move to another office or CPA firm will have to give up their largest client.