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arushi_13
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| Posted: 12 Jul 2009 at 12:13 | IP Logged
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I m trying to compare both the Qs below.Q1 says that sibling can be considered as a part of "member class". Whereas Q2. does not consider sibling's loan to the director of the client as one that impairs independence. I found the answers conflicting.
Will really appreciate if someone can clarify.
Thanks a lot.
Q1.Kar, CPA, is a staff auditor participating in the audit engagement of Fort, Inc. Which of the following circumstances impairs Kar's independence?
a. During the period of the professional engagement, Fort gives Kar tickets to a football game worth $75.
b. Kar owns stock in a corporation that Fort's 401(k) plan also invests in.
c. Kar's friend, an employee of another local accounting firm, prepares Fort's tax returns.
d. Kar's sibling is an internal auditor employed part-time by Fort.
Explanation
Choice "d" is correct. Independence of a member is impaired if the CPA's spouse, parent, child, sibling, etc. are employed by the client in a position that is audit sensitive (i.e., internal auditor, cashier, accounting supervisor etc.)
Q2.Under the ethical standards of the profession, which of the following situations involving nondependent members of an auditor's family is most likely to impair the auditor's independence?
a. A parent's immaterial investment in a client.
b. A first cousin's loan from a client.
c. A spouse's employment with a client.
d. A sibling's loan to a director of a client.
Explanation
Choice "c" is correct.
Under Rule 101 of the Code of Professional Conduct, a member of a firm who is subject to independence in fact and appearance extends to the member's spouse, dependent children, and dependent
relatives. A spouse working for a client is considered part of the class of "members" subject to independence.
Choices "a", "b", and "d" are incorrect. These choices do not by definition, fall within the "member" class.
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ALL DONE !!!
Arushi
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ms500
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| Posted: 12 Jul 2009 at 13:01 | IP Logged
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Hi Arushi
as per my understanding, we have to select the most correct ans from given choices. I would considered spouse at first place and sibling at second
Q1- siblings loan will impair the independence, would be the best answer
Q2- between the two choice of spouse and sibling, employment of spouses would be the best choice to impair and at sibling's loan would be at second choice
Appreciate if some one verify
Thanks
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arushi_13
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| Posted: 12 Jul 2009 at 19:37 | IP Logged
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Thanks ms500. Really appreciate your help.
Thanks a lot again.
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ALL DONE !!!
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bala
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| Posted: 12 Jul 2009 at 21:46 | IP Logged
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I also did this one wrong.
Reason- A spouse's employment with a client. we dont know if the
spouse is in a key position. nothing is clearly specified. unless the
spouse is in a key position Independence is not impaired(that's what i
understood. correct me if im wrong!)
so i went for the option sibling's loan to a director of a client.
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Aznanalyst83
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| Posted: 12 Jul 2009 at 23:14 | IP Logged
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Well it could swing both ways, since a sibling's loan to a director may not be material. Do you care if your baby sister loaned your client $20 coz he forgot his wallet?
Employment is more likely to be material of the two.
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Topic: Independence rules
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