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When does the SEC consider independence impaired?
- You are not independent in fact
- A reasonable investor would conclude that you would not be capable of acting without bias
SEC may look to four basic principles in evaluating independence
- Does the relationship create a mutual or conflicting interest?
- Does it place the firm in a position where it will audit its own work
- Does the firm effectively act as management/employee of the client
- Does it place the firm in a position where it acts as an advocate for the client
Difference between AICPA and SEC rules concerning jointly-held investments
- AICPA: impaired if investment is material to covered member's net worth
- SEC: materiality doesn't matter