What is the effect on a CPA’s independence when a client threatens legal action for a small monetary amount due to late filing?

When evaluating the effect of a client's threat of legal action on a CPA's independence, it is important to consider the nature and significance of the threat. In this scenario, the potential legal action is regarding a small monetary amount due to late filing.

Independence is a core principle for CPAs, ensuring that they remain objective and free from conflicts of interest when providing audit and attestation services. The independence of a CPA is generally not impaired by the mere fact of a client threatening legal action, particularly when it involves a minor issue. A small monetary dispute is unlikely to create a situation where the CPA’s objectivity and integrity are compromised, as it does not create a significant financial risk or pressure that would affect the CPA's ability to carry out their professional responsibilities.

Additionally, for an impairment of independence to occur, it typically requires a more substantial threat or relationship that could influence the CPA’s judgment or decisions. Therefore, in this context, the threat of legal action based on a minor financial discrepancy does not fundamentally undermine the CPA's independence with the client, allowing the CPA to maintain an objective stance in their professional services.