American Institute of Certified Public Accountants (AICPA) Practice Exam

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What is the potential consequence of having a financial interest in a client?

It may enhance the credibility of the CPA.
It can impede the perception of objectivity.
It has no impact on professional judgment.
It can allow for more favorable audit results.

The correct answer is: It can impede the perception of objectivity.

Having a financial interest in a client can impede the perception of objectivity, which is crucial for maintaining the integrity of the accounting profession. When a CPA has a financial stake in a client, it may lead others to question the objectivity of the CPA's judgments and recommendations. This situation creates a conflict of interest, where personal financial gain might influence professional decision-making. Maintaining objectivity is essential for ensuring that the information presented to stakeholders, such as financial statements or audit results, is reliable and unbiased. Stakeholders rely on the professionalism of CPAs to provide an accurate representation of a client’s financial situation, and any perceived conflict can undermine that trust. Options that suggest benefits, such as enhancing credibility or allowing for favorable audit results, overlook the ethical implications and organizations' standards, including those set by the AICPA, which stress the importance of independence and objectivity in professional practice. Thus, having a financial interest in a client directly challenges these fundamental principles.