A partner for a multioffice CPA firm has a mother who owns 4% of a potential aud

Question

A partner for a multioffice CPA firm has a mother who owns 4% of a potential audit client. This 4% is not material to the client nor to the mother's net worth. The engagement would be performed by an office with which the partner is associated. Regarding the AICPA CODE OF CONDUCT would the firm be considered in violation for purposes of accepting the audit engagement? a. Yes, but none of these answers, a-b-c, apply b. No. The independence rules regarding covered members will not be violated c. Yes. The independence rules regarding covered members will be violated d. No because the independence rules regarding non covered members apply.

Explanation / Answer

Section 101 - Independence

Auditor independence is impaired if a member on the engagement team has a direct or material indirect financial interest in the client. Member's on the engagement team are not allowed to be on the board of trustees of a trust that owns, or has committed to owning more than 10% of the client's equity. A member or any of their immediate family are not allowed to own more than 5% of the clients equity.

Correct answer is

b. No. The independence rules regarding covered members will not be violated

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