Covered member independence

This topic has 4 replies, 4 voices, and was last updated 7 years, 9 months ago by Jchen.

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June 18, 2016 at 8:04 am #202925

Jchen
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If the covered member owns immaterial and indirect interest from the audit client, the independence is not impaired right?

Can someone please kindly advise.

Thanks in advance!!

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June 18, 2016 at 12:38 pm #782280

qarnism
Participant

Material. Direct. X
Material. Indirect. X
Immaterial. Direct. X
Immaterial. Indirect Ok

e.g. You've 1 share with third party that working with your client.
So, this immaterial and indirect = doesn't impair independence.

June 18, 2016 at 11:32 pm #782281

Anonymous
Inactive

Right. I think of it this way.

If I own stock in the audit client, I'm not independent. Doesn't matter if it's $10k or $100k.

If I have $10k in a mutual fund and the fund owns stock in many companies, including the client, that doesn't impair independence.

June 19, 2016 at 12:46 am #782282

Anonymous
Inactive

I had a way of remembering this, wish I could remember. The important part is:
All Direct Interests (Materiality is irrelevant)
All Material Interests (Direct/Indirect is irrelevant)

I think that's right. There's some great quizzes in the Journal of Accountancy:
https://www.journalofaccountancy.com/issues/2012/oct/20125461.html
https://www.journalofaccountancy.com/issues/2014/dec/applied-ethics-quiz.html
https://www.journalofaccountancy.com/issues/2010/oct/20103166.html
https://www.journalofaccountancy.com/issues/2010/jun/20102778.html

July 4, 2016 at 6:54 am #782283

Jchen
Participant

Thanks Guys!

You are awesome!!
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