Chapter 19: Professional Conduct, Independence, and Quality Management

Question 1

Attestation engagement

Answer 1

an engagement that requires independence as set forth in the AICPA statements on auditing standards, Statements on Standards for Accounting and Review Services, and Statements on Standards for Attestation Engagements. Attest engagements include financial statement audits, reviews, and examinations of prospective financial information.

Question 2

Close relative

Answer 2

a parent, sibling, or nondependent child

Question 3

Covered member

Answer 3

a member that is:
* an individual on the attest engagement team
* an individual in a position to influence the attest engagement
* a partner or manager who provides nonattest services to the attest entity beginning once he or she provides 10 hours of nonattest services to the entity within any fiscal year and ending on the later of the date 1. the firm signs the report on the financial statements for the fiscal year during which those services were provided or 2. he or she no longer expects to provide 10 or more hours of nonattest services to the attest entity on a recurring basis.
* a partner in the office in which the lead attest engagement partner primarily practices in connection with the attest engagement
* the firm, including the firm’s employee benefit plans.
* an entity whose operating, financial, or accounting policies can be controlled by any of the individuals or entities described in parts 1-5, or by two or more such individuals or entities if they act together.

Question 4

Ethics

Answer 4

a system or code of conduct based on moral duties and obligations that indicates how an individual should behave.

Question 5

Financial interest

Answer 5

an ownership interest in an equity or a debt security issued by an entity, including rights and obligations to acquire such aninterest and derivatives directly related to such interest.

Question 6

direct financial interest

Answer 6

a financial interest that is owned directly by an individual or entity, or is under the control of an individual or entity

Question 7

indirect financial interest

Answer 7

a financial interest that is beneficially owned through an investment vehicle, estate, trust, or other intermediary when the beneficiary does not control the intermediary or have authority to supervise or participate in the intermediary’s investment decisions.

Question 8

immediate family

Answer 8

a spouse, spousal equivalent, or dependent (whether or not related.)