Financial Interests-whole section Flashcards
if a covered member has any financial interest in a cleint then ______. only if interests are both indirect and immaterial is independence not impaired
independence is impaired
direct and material
indirect and imaterial
independence is:
impaired
not impaired
financial interest def
ownership or obligation to obtain ownership
direct financial interest
owned directly by covered member
an interest owned directly (even if managed by others)
an interest beneficially owned through an investment vehicle, trust, etc. and has ability to supervise or participate its investment decisions, or controls it
indirect financial interest
a financial interest beneficially owned through an investment vehicle, estate, trust, etc, when the beneficiary neither
controls the intermediary
has the authority to supervise or participate in its investment decisions
even if a partner or professional employee of a firm is not a covered member, that person or his immediate family cannot own more that ____of a clients ownership interests
5%
unsolicited financial interests
if you are going to inherit shares etc, independence will not be impaired if they dispose of the interest as soon as practicable within 30 days.
if you are going to get them eventually when that person dies but you dont have them yet you cant be on the engagement and they cant be over 5%.
even a few shares is a ______if they are direct
independence violation
they they own a immaterial investment in an attest client and they are indirect (no supervision,influence etc) then it is
not a independence violation and it’s fine
if you have the ability to influence the decision (manager, supervisor etc)
then you have a direct investment and independence is impaired
firms may maintain depository accounts at a bank that is an attest client if they conclude that the liklihood is remote that the bank will
experience financial difficulties
individual covered members can have depository accounts if the money able to be lost is material if the bank goes under.
ex the money in a bank is fdic insured up to 200k. if you have 3ook in the bank then that 100k is material to you and wont be insured if the bank goes under. this would violate independence. if you have 210k in the bank then 10k is not insured but its not material to you so independence is not impaired because 10k is not material.
insurance companies almost never have independence issues because most dont have investment options. some do though and if you choose to invest in a attest client then
independece issues arise
capital lease (to own ) \_\_\_\_ operating lease \_\_\_\_\_
impairs independence
does not
immediate family members-spouse, spouse equivalents, dependents
close relatives-parents siblings and nondependents
immediate family members must do the same thing as covered members
