In short
Securities and Exchange Commission rules impair a firm's independence if a former member of the audit team takes a financial reporting oversight role at a public audit client, such as chief financial officer, within one year before the audit begins.
Key takeaways
- The rule covers the lead partner, concurring partner and others on the engagement team.
- American Institute of Certified Public Accountants rules address the threat through safeguards rather than a fixed period.
- It reduces familiarity and self-interest threats.
Where it's tested
AUD: Professional Ethics & Independence — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
An audit senior on the engagement team owns 10 shares of the audit client's common stock, worth approximately $300. What is the effect on independence?