Question

Your spouse Martha is the CFO of Company A, which is a new audit client of the CPA firm that employs you. In which situation would Martha's employment impair your independence?

Answer 1

Martha's employment as CFO of Company A would impair your independence as a CPA firm employee. In such a situation, it is important to disclose the conflict of interest and follow professional guidelines and ethical standards.

Step-by-step explanation:

In this situation, Martha's employment as the CFO of Company A would impair your independence as a CPA firm employee. According to the AICPA Code of Professional Conduct, independence is compromised if a covered member has a close family member in a position of significant influence over the financial statements of an audit client. As the CFO, Martha has a direct impact on the financial statements of Company A.

Having Martha as your spouse may create a conflict of interest and could compromise your objectivity and impartiality as an independent auditor. It is important to maintain independence in both appearance and fact, to ensure the integrity and credibility of the audit process.

It is essential to disclose this conflict of interest to your employer and follow the professional guidelines and ethical standards set by your CPA firm and the AICPA. Transparency and open communication are crucial in such situations to maintain professional integrity.