Partnerships, 529s, Trust and Estates, Employee Benefit Plans

Question 1

Owners of a 529 account used to prepay tuition have a _____ interest in the plan but only an indirect interest in its underlying investments.

Answer 1

Direct

Question 2

The fact that a covered member is asked to serve as trustee of a trust or executor of an estate does not by itself create an independence problem if an attest client’s shares are owned by the trust or estate. However, there is a problem if:

Answer 2

1)
The covered member has the ability to make investment decisions for the trust or estate.
2)
The trust or estate owns or is committed to acquiring more than 10% of the attest client’s ownership interests, or
3)
The value of the trust’s or estate’s ownership interest in the client exceeds 10% of the total assets of the trust or estate.

Question 3

If a covered member acts as a grantor to set up a trust, its investments are direct financial interests if any of the following are true:

Answer 3

1) The covered member has the ability to amend or revoke the trust.
2) The covered member has authority to control the trust.
3) The covered member has the ability to supervise or participate in the trust’s investment decisions.
4) The underlying trust investments ultimately will revert to the covered member as the grantor.

Question 4

Independence is impaired if a covered member participates in an employee benefit plan that is an attest client or sponsored by one. Two exceptions apply:

Answer 4

1) When a covered member is an employee of a government organization that sponsors an employee benefit plan and the covered member is required by law to audit the plan, then it is acceptable to do so if all of the following safeguards are in place:
a. The covered member is required to participate in the plan as a condition of employment.
b. The plan is offered to all employees in comparable positions.
c. The covered member is not a director, officer, employee, promoter, or the like of the plan.
d. The covered member has no influence or control over the investment strategy, benefits, or other management activities of the plan.
2) When the covered member formerly was associated with an attest client but is no longer, then independence is not impaired.