A partner for a multioffice CPA firm has a father who owns 90% of a potential au

Question

A partner for a multioffice CPA firm has a father who owns 90% of a potential audit client. The engagement would not be performed by an office with which the partner is associated. The partner would not provide any services to the client as a member of the CPA firm but will work for the client as an outside consultant for the company XYZ in the summer when the CPA firm has little work. Regarding the AICPA CODE OF CONDUCT would the CPA firm or the partner be considered in violation for purposes of accepting the audit engagement? a. Yes. Rules regarding covered members will be violated b. Yes, but none of these answers, a-c, apply c. Yes. the AICPA rules that govern CPA firm employees will be violated d. No.

Explanation / Answer

Answer

Correct answer is a. Yes, Rules regarding covered members will be violated

As per Rule of conduct 101-Independence , Independence is impaired if a covered member has a direct financials interest in the client or certain relationships. A covered member includes an individual on the engagement team or who can influence the engagement or the accounting firm as a whole. The relationship even extends to immediate family members. In the above case, Independence is impaired, since the partners' father has direct financial interest in the client. Hence this is a clear violation to the AICPA CODE OF CONDUCT

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