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An issuer may hire an employee of a registered public accounting firm who served on the audit engagement team within the previous year for what position?
Under SEC independence regulations, an accounting firm may not be independent with respect to an audit client if a former partner, principal, shareholder, or professional employee accepts employment with a client. Independence is impaired if (s)he (1) has a continuing financial interest in the firm or (2) is in a position to influence the firm’s operations or financial policies. Moreover, an accounting firm is not independent if a CEO, CFO, controller, or person in an equivalent position for an issuer was (1) employed by that firm and (2) participated in any capacity in the audit of that issuer during the year before the beginning of the audit. Accordingly, a staff accountant’s employment by the client does not impair independence. Such an individual does not have a continuing financial interest in the firm or the ability to influence its operations or policies.
when would a covered member’s independence be impaired with respect to a nonissuer client?
The member owns municipal utility bonds issued by a client, and the bonds are not material to the member’s wealth.
Independence is impaired if a covered member has a direct financial interest in a client, e.g., ownership of equity, debt securities (such as bonds issued by an attest client), or other investments in a client. A direct financial interest impairs independence even if it is not material to the member’s wealth.
T/F ---The accountant owns the working papers but generally may not disclose them without the client’s consent or a court order.
True --- A member’s working papers, including any analyses and schedules prepared by the client at the request of the member, are the member’s property, not the client’s. However, under Conduct Rule 301, a member in public practice ordinarily must not disclose confidential client information contained in the working papers without the client’s specific consent. Exceptions to this principle include compliance with a subpoena or summons or with applicable laws and regulations.
Under the IFAC’s Code of Ethics for Professional Accountants, fundamental principles include
Professional behavior and confidentiality are fundamental principles. According to the principle of professional behavior, a professional accountant must comply with relevant laws and regulations and avoid any action that discredits the profession. According to the principle of confidentiality, a professional accountant must respect the confidentiality of information acquired as a result of professional and business relationships. Thus, (s)he must not disclose any such information to third parties without proper and specific authority, unless a legal or professional right or duty exists to disclose. Moreover, (s)he must not use the information for the personal advantage of the professional accountant or third parties.
If a CPA and XM’s president each owns 25% of FOB Corporation, a closely held company, would the CPA lack independence
yes --- Independence is impaired if, during the period of the professional engagement, “a covered member had a joint, closely held investment that was material to the covered member.” A joint, closely held investment by the member and the client (or its officers, directors, or an owner with significant influence) enables them to control the investee entity or property.