Final answer:
Independence under AICPA Code would be impaired if an immediate family member of an auditor is employed by an audit client in a position of influence over the financial statements. Employment in an insignificant capacity may not necessarily impair independence, but any significant influence does.
Step-by-step explanation:
The AICPA Code of Professional Conduct stipulates certain rules regarding the independence of auditors. According to the Code, an auditor's independence is impaired if an immediate family member is employed by the audit client in a position that is able to exert significant influence over the content of the financial statements or the conduct of the audit. Therefore, if a family member is employed in a position of insignificant influence, such as a low-level employee without any managerial or financial reporting roles, independence may not necessarily be impaired. However, employment at any capacity that can significantly influence the financial statements would impair independence.
It's important to understand that the impairment of independence can arise from both actual conflicts of interest as well as situations that present a significant threat to independence that cannot be mitigated by safeguards, leading to a perception of compromised independence.