revising the report on Mocline Tobacco?

A potential client contacted an employee and wanted detailed performance records of client accounts so he can decide whether to invest with the firm."

Basch goes on to say that she is responsible for developing a presentation on the differences between the Prudent Investor and the Prudent Man rules for managing trust portfolios. Basch explains to Cooken that the Prudent Investor rule requires a trustee to exercise five fiduciary standards in managing the assets of a trust account, including care, skill, caution, loyalty, and impartiality. She states that although there are many differences between the Prudent Man and the newer Prudent Investor rule, one element of continuity is the duty of the trustee to delegate investment authority in the event that the trustee lacks sufficient investment knowledge.

Toward the end of the lunch meeting, Basch suggests that in exchange for research published by Cooken and Khasko, Basch can have portfolio managers at her firm send clients that are too small for their firm to Khasko. Since Khasko specializes in clients with smaller portfolios, the arrangement sounds like a good idea to Cooken. Cooken tells Basch that she will think the arrangement over and get back with her next week with a decision.

Which of the following statements provides the least appropriate , justification for Cooken’s caution about

revising the report on Mocline Tobacco?
A . Cooken knows next to nothing about Mocline stock.
B . Cooken’s uncle, George Whales, is the CFO of Mocline.
C . In college, Cooken worked for Mocline but never declared the income on her taxes.

Answer: C

Explanation:

While Cookcn’s tax avoidance may represent a professional-conduct issue, it has no bearing on her ability to write a report on Mocline. While damson may be an expert on Mocline Tobacco, Cooken does not know enough about the stock to write about it without taking the risk of being in violation of Standard V(A) Diligence and Reasonable Basis. Because of Cooken’s relationship to the CFO of Mocline and ownership of Mocline stock, her objectivity might be questioned. (Study Session 1, LOS 2.a)