In: Accounting
Visit the AICPA's website (www.aicpa.org), under Research/Standards. Click on “Code of Professional Conduct.” Find the Independence Rule and its related interpretations in Part 1 of the Code of Professional Conduct. Research the relevant rules, interpretations, and ethics rulings to answer the following questions:
a. Would independence be considered impaired if a member joined a trade association that is an entity of the firm?
b. A member provides extensive advisory services for an entity. In that connection, the member attends board meetings; interprets financial statements, forecasts, and other analyses; and counsels on potential expansion plans and on banking relationships. Would independence be considered impaired under these circumstances?
c. If a member signs or cosigns checks issued by a debtor corporation for a creditors' committee in control of the debtor corporation, which will continue to operate under its existing management, would independence be impaired with respect to the debtor corporation?
d. A member has been designated to serve as an executor or trustee of the estate of an individual who owns the majority of an entity's stock. Would independence be considered impaired with respect to the entity?
e. A member serves as a director or officer of a United Way or similar fund-raising organization. Certain local charities receive funds from the organization. Would independence be considered impaired with respect to such charities?
f. An entity of the member's firm has not paid fees for previously rendered professional services. Would independence be considered impaired for the current year?
ANS: A. Independence of the member would not be considered to be impaired provided the member did not serve as an officer, director, or in any capacity equivalent to that of a member of management.
ANS : B. Independence of the member would not be considered to be impaired because the member's role is advisory in nature.
ANS : C.Independence of the member would be considered to be impaired under each situation described since these are management functions.
ANS : D.The mere designation of a member to become executor or trustee would not be considered to impair the independence of the member. Actual service would be considered to impair the member's independence.
ANS :E.Independence of the member's firm would not normally be considered to be impaired unless the United Way or similar organization that operates as a federated fund-raising organization exercises managerial control over the local charities participating in the fund-raising organization.
ANS : F.Independence of the member's firm is considered to be impaired if, when the report on the client's current year is issued, billed or unbilled fees, or a note receivable arising from such fees, remain unpaid for any professional services provided more than one year prior to the date of the report.