Question

Which of the following examples would NOT be prohibited under independence rules?

-professional employee of an accounting firm who is not a covered member holding 3% of shares in an attest client
-professional employee of an accounting firm who is not a covered member holding a position on the board of director of an attest client
-spouse of a professional employee of an accounting firm who is not a covered member holding a position of an officer for the client's pension fund
-the father of a covered member working as a CEO of the attest client

Answer 1

Under independence rules for accounting professionals, a professional employee of an accounting firm who is not a covered member holding 3% of shares in an attest client would NOT be prohibited, as long as the share ownership does not constitute significant influence over the client.

Step-by-step explanation:

The question concerns the independence rules for accounting professionals concerning potential conflicts of interest when performing attestation services. According to independence rules, the following scenario would NOT be prohibited: a professional employee of an accounting firm who is not a covered member holding 3% of shares in an attest client. Covered members are typically those in a position to influence the attestation engagement and their immediate family.

Since the professional employee holding shares is not a covered member, this would generally be permitted under independence rules, assuming the share ownership is not substantial enough to exert significant influence on the attest client.

On the other hand, other situations listed, such as a covered member's father working as a CEO of the attest client, or a spouse holding a significant position in the client's pension fund, would likely be prohibited due to the close relation to the covered member and the potential for influencing the attestation engagement.