January year 1 through to may year 6 when the manager

January Year 1 through to May, Year 6 when the manager began working with the CPA
firm. 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 are
material to the client's financial statements.
c.
A financial institution client loans the auditor money to buy a car but does not collateralize
the loan.
d
.
The auditor's brother-in-law's father is the controller of the client being audited.
Explanation
Choice "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 the Code, a

close relative is defined as a parent, sibling, or nondependent child. Since a brother-in-law and
family of the brother-in-law are not considered to be close relatives, independence would not be
impaired.
Choice "a" is incorrect. A CPA auditor cannot work for the client in a key position during the
audit year.
Choice "b" is incorrect. If the results of the valuation and appraisal services are material to the
client's financial statements, the auditor's independence is impaired.
Choice "c" is incorrect. Fully-collateralized automobile loans made within the normal course of
business 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 the
following circumstances impairs Kar's independence?
Choice "b" is incorrect because a friend's relationship to the audit client does not affect
independence.