January year 1 through to may year 6 when the manager

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January Year 1 through to May, Year 6 when the manager began working with the CPAfirm. The current audit period for this client is from April 1, Year 6 through to March 31,Year 7.b.The auditor provides valuation and appraisal services to a client, the results of which arematerial to the client's financial statements.c.A financial institution client loans the auditor money to buy a car but does not collateralizethe loan.d.The auditor's brother-in-law's father is the controller of the client being audited.ExplanationChoice "d" is correct. Independence is impaired by a member, a member's spouse or dependents,or a close family member who holds a key position in an audit client. According to theCode,a
close relative is defined as a parent, sibling, or nondependent child. Since a brother-in-law andfamily of the brother-in-law are not considered to be close relatives, independence would not beimpaired.Choice "a" is incorrect. A CPA auditor cannot work for the client in a key position during theaudit year.Choice "b" is incorrect. If the results of the valuation and appraisal services are material to theclient's financial statements, the auditor's independence is impaired.Choice "c" is incorrect. Fully-collateralized automobile loans made within the normal course ofbusiness by a financial institution are specifically permitted and do not impair independence.Since this loan is not collateralized, independence is impaired.Kar, CPA, is a staff auditor participating in the audit engagement of Fort, Inc. Which of thefollowing circumstances impairs Kar's independence?
Choice "b" is incorrect because a friend's relationship to the audit client does not affectindependence.

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