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During the audit of Brown Company, the lead partner assigned to the audit engagement has learned from the client's board of directors that the company
During the audit of Brown Company, the lead partner assigned to the audit engagement has learned from the client's board of directors that the company will soon begin paying a healthy dividend on outstanding stock. Brown Company plans to issue a press release in the following month to apprise the market of this. The lead partner assigned to this audit contacts a close friend and advises him of this, instructing him to buy up some of the company stock as he believes the value will increase. With respect to independence, this action would best be described as no threat to independence in appearance, because the partner is using a close friend to buy the stock and thus appear beyond reproach a threat to independence in fact, because the audit partner assigned to the engagement is neglecting the public trust for personal gain no threat to independence in fact, because the lead partner has avoided a conflict of interest by having a friend purchase the stock a threat to independence in appearance because if it is determined that the audit partner took this action, his or her reputation would be damaged
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