Overview and unsolicated financial interests

Question 1

What is the ownership cutoff that will disqualify a firm if its partners and professional employees who are not covered members own stock in an audit client?

Answer 1

5%

Question 2

Under what two conditions will a covered member not lose independence when she learns she has been named in a will to receive securities of an attest client when her aunt dies at some unspecified time in the future?

Answer 2

1. ) When she is not a team member

2. ) When the amount of securities is not material to her

Question 3

If a covered member learns that he has inherited the securities of an attest client, what should the member do?

Answer 3

Sell the securities as soon as practicable but definitely within 30 days

Question 4

What types of financial interests impair independence?

Answer 4

• Direct and material
• Direct and immaterial
• Indirect and material

Question 5

When does beneficial ownership occur?

Answer 5

When an individual or entity is not the record (legal) owner but has a right to some or all of the benefits underlying ownership, as in the beneficiary of a trust or an estate

Question 6

What types of financial interest do not impair independence?

Answer 6

Indirect and immaterial

Question 7

Define “financial interest.”

Answer 7

Ownership, or an obligation to obtain ownership, in equity, debt, or derivatives issues by an entity