Question

Which of the following most likely does not impair a CPA’s independence?

a. Serving on the board of directors of a nonprofit social club if the board performs a management function.

b. Belonging to a tennis club that requires a member to acquire a pro rate share of equity securities.

c. Being a member of the committee that controls a client’s deferred compensation plan.

d. Participating in the engagement even though the CPA has a brother who is both a stockholder and vice president of the client.

Answer 1

Answer: b. Belonging to a tennis club that requires a member to acquire a pro-rate share of equity securities.

Explanation:

As per ET Section 191 (Ethical Ruling on Independence, Integrity, and Objectivity), as far as acquiring of club membership is important for social matters, such associations would not impair a CPA’s independence. Also, ownership of such equity securities are not considered as a financial interest of direct nature as per the rules mentioned in Rule 101 - Independence.