Question 6 Mariposa CPA's acquired Stockton CPA's in December 20X4. Mariposa is considered the acquiring firm and Stockton is considered the acquired firm. The combined firms will continue as Mariposa & Stockton CPA's after the acquisition. Which of the following is correct relating to independence in this situation: If the acquiring firm provided prohibited nonattest services to an attest client of the acquired firm during the period covered by the financial statements, threats to compliance with the "Independence Rule will not be at an acceptable level and cannot be reduced to an acceptable level by the application of safeguards. Accordingly, the acquiring firm's independence will be impaired with respect to the attest client. If the acquired firm provided prohibited nonattest services to an attest client of the acquiring firm prior to the financial statement period covered by the acquiring firm's next attest report, the ac- quiring firm's independence would be impaired. Both a. and b. are correct. Neither a. nor b. is correct. Question 27 McDaddy, a member, prepared a personal tax return for Ferguson for the year 20X4 which was filed electronically on April 15, 20X5. In September 20X5, the 20X4 return was audited and the examination resulted in the disallowance of Deduction A. The examination concluded on November 1, 20X5. In March of 20X6, McDaddy is in the process of preparing a personal tax return for Ferguson for the year 20X5 and Ferguson wants McDaddy to include Deduction A in the tax return. Which of the following statements is true regarding McDaddy's responsibilities as it relates to taking the previously disallowed Deduction A on Ferguson's 20X5 tax return? McDaddy is bound by the disallowance of Deduction A on the 20x4 tax return and is not allowed to sign a return for 20x5 that contains Deduction A. If the disallowance of Deduction A was caused by a lack of documentation, McDaddy may recommend taking Deduction A and can sign the return. Since the taxing authority will always rule in the same manner regarding Deduction A as it relates to Ferguson, McDaddy is bound by the disallowance of Deduction A on the 20x4 tax return and is not allowed to sign a return for 20x5 that contains Deduction A. None of the above