In what scenario might a CPA's independence be compromised due to family relationships with a client?

A CPA's independence is considered compromised when a relative is a key executive in the client company because this relationship creates a direct threat to objectivity and impartiality. The presence of a close family member in a significant role within the client's organization can influence the CPA's ability to make impartial judgments and decisions regarding the audit or financial reporting. The potential for bias increases significantly when a relative holds a position of authority, especially one that impacts financial decisions, which could undermine the credibility of the CPA's work.

This scenario highlights the importance of maintaining professional boundaries and independence in the practice of accounting. Ethical guidelines require CPAs to be vigilant about any relationships that could affect their objectivity, ensuring that they avoid situations where conflicts of interest may arise, especially with key personnel at a client firm who are in positions to make significant management or operational decisions.