Other Associations and Relationships

Question 1

Solly is a tax partner for the Duval Accounting Firm. She does not live in a convent. She interacts with the world. Which of the following is not true?
Solly may join the Pleasant View Country Club, which is an audit client of Duval. So long as she joins primarily to play golf, independence is not impaired.
Solly may buy a unit in the Last Days Condominium complex, even if Duval audits the condo association for the complex. Independence would not be impaired so long as several safeguards are met, such as Solly’s annual assessment is not material to either her or the association, and sale of the association’s common assets would not result in a distribution to Solly.
Solly may join the Naval Credit Union in her community, even if the credit union is a Duval audit client. Independence would not be impaired if Solly qualified to join the credit union because her father had a 30-year career in the Navy.
Solly may not accept a $100 ceramic frog from the Local Food Pantry, an audit client of Duval. Independence would be impaired by this gift even if Solly was a long-time volunteer at this food kitchen for the homeless that wished to honor Solly for 10 years of volunteering and knew that she collected frogs of various types.

Answer 1

Solly may not accept a $100 ceramic frog from the Local Food Pantry, an audit client of Duval. Independence would be impaired by this gift even if Solly was a long-time volunteer at this food kitchen for the homeless that wished to honor Solly for 10 years of volunteering and knew that she collected frogs of various types.

Correct! This is false. Independence would not be impaired by this gift which seems to be clearly insignificant (only $100) to Solly. Additionally, the limitation on gifts applies only to the firm, audit team members and PTIs. It does not apply to an OPIO like Solly, though the Conceptual Framework is always lurking in the background and should be considered just to be safe.

Question 2

Which of the following safeguards must be met for Sam, who is a member of his condominium association, to be able to serve as a covered member of his firm, which audits the condominium association, without impairing independence?
Sam’s annual assessment must not be material to him or to the association.
If the condominium association were liquidated, Sam would not receive a distribution.
The condominium association’s creditors would not be able to successfully sue Sam to recover his personal assets if the association became insolvent.
All of the three choices provided.

Answer 2

All of the three choices provided.

Because the three answer choices provided are all correct, this is the best answer.

Question 3

Which categories of covered members must be concerned with independence problems that might arise from gifts they receive from attest clients?

I.	Team members.
II.	Other partners in the office.
I only.
II only.
Both I and II.
Neither I nor II.

Answer 3

I only.

Regarding independence, the firm, team members, and those in a position to influence may not accept gifts from attest clients unless the value of those gifts is clearly insignificant to the recipient.