Examples q q a professional employee in the office

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Unformatted text preview: dence of the firm. EXAMPLES q q A professional employee in the office that conducts an audit, who is not part of the audit team, may own a 5% or less equity interest in a client of the firm. However, a partner in that office must not. (S)he is considered a covered member and must have no financial interest in the client. g. Independence is impaired if a firm or one of its partners or professional employees is associated with the client as an officer, director, manager, employee, promoter, underwriter, etc. CONCEPT The individual or firm must not appear to be acting in the capacity of management or employee of the client. This includes having the responsibility to perform any duties of employees or management. EXAMPLES A covered member must not (1) sign or cosign client checks, (2) supervise employees, (3) authorize transactions, (4) execute transactions, (5) prepare source documents, or (6) maintain custody of assets for a client. Copyright © 2012 Gleim Publications, Inc., and/or Gleim Internet, Inc. All rights reserved. Duplication prohibited. www.gleim.com 5 SU 2: Professional Responsibilities h. Independence may be impaired if a covered member was formerly employed by or associated with the client as an officer, director, promoter, underwriter, etc. CONCEPT The covered member must disassociate from the client before becoming a covered member. (S)he also must not (1) participate on the engagement team or (2) be able to influence the engagement when his/her former employment/ association overlaps the period of the engagement. EXAMPLE Disassociation includes, among other things, disposing of direct or material indirect financial interests and ceasing to participate in most employee benefit plans. i. The covered member’s immediate family (spouse or dependents) are subject to Rule 101. CONCEPT The financial interests, employment relationships, and other circumstances of immediate family members are attributed to the covered member. EXAMPLES An immediate family member may be employed by the client in a non-key position. As a result of such permitted employment, the immediate family member may participate in various employee benefit plans under limited circumstances. For example, the immediate family member must not, among other things, (1) participate on the engagement team or be able to influence the engagement or (2) be involved in investment decisions. j. As a result of his/her permitted employment, an immediate family member of a covered member may participate in a benefit plan that is an attest client or that is sponsored by an attest client (other than a client’s share-based compensation arrangement or nonqualified deferred compensation plan — see item k. on the following page) provided that the plan is offered to all employees in comparable employment positions and the immediate family member does not serve in a position of governance for the plan. 1) An immediate family member of a covered member may hold a direct or material indirect financial interest in an attest client through participation in a plan, provided that the covered member neither participates on the attest engagement team nor is in a position to influence the attest engagement; such investment is an unavoidable consequence of such participation; and in the event that a plan option to invest in a nonattest client becomes available, the immediate family member selects such option and disposes of any direct or material indirect financial interests in the attest client as soon as practicable but no later than 30 days after such option becomes available. CONCEPT This covers general benefit plans for immediate family members that may create financial interests in clients and impact the covered member. EXAMPLE The spouse of a covered member has a non-key position in a client and, along with other employees, is a part of an employee profit sharing plan in a client. Copyright © 2012 Gleim Publications, Inc., and/or Gleim Internet, Inc. All rights reserved. Duplication prohibited. www.gleim.com 6 SU 2: Professional Responsibilities k. As a result of his/her permitted employment, an immediate family member of a covered member may participate in a share-based compensation arrangement that results in him/her holding a beneficial financial interest in an attest client, provided that the covered member neither participates on the attest engagement team nor is in a position to influence the attest engagement and the immediate family member does not serve in a position of governance for the share-based compensation arrangement. 1) When the beneficial financial interests are distributed or the immediate family member has the right to dispose of the shares, the immediate family member must dispose of the shares as soon as practicable but no later than 30 days after (s)he has the right to dispose of the shares. CONCEPT This covers specific stock-based benefit plans for immediate family members that may create financial interests in clients and impact the covered member...
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This note was uploaded on 04/02/2013 for the course ACCT 7100 taught by Professor Swanson during the Spring '13 term at Valdosta State University .

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