Impairing Independence

CPA Yolanda is the engagement partner on the Casa Construction Company (CCC) audit supervised from the Santa Fe office of the firm. Yolanda owns 100 shares of CCC.

Yes; a member of the engagement team cannot hold a direct financial interest

CPA Yolanda sold the 100 CCC shares to CPA Javier, who is another partner in the Santa Fe office but who is not involved in the CCC audit.

Yes; no other partner in the Santa Fe Office (covered persons) cannot own direct financial interest in CCC

CPA Javier's son sold the shares to Javier's father.

No; a father is a close family member not
immediate
family, so the financial interest does not impair independence

CPA Javier's father was happy to combine the 100 CCC shares with shares he already owned because now he owns 25 percent of CCC and can control many decisions of the board of directors.

yes; controlling interests in audit clients when held by close family members of covered persons impairs independence

Posts the client-approved entries to a clients trial balance

No

Authorize the client's customer credit applications

Yes

Use CPA's information-processing facilities to prepare the client's payroll and generate checks for the client treasurer's signature

no

Sign the client's quarterly federal payroll tax return

yes

advise client management about the application or financial effect of provisions in an employee benefit plan contract

no

Have an emergency signature authority to cosign cash disbursement checks in connection with a client's hospital benefit plan

yes