Auditors Independence- Accounting Paper

You are the partner-in-charge of a large metropolitan office of a regional public accounting firm. Two members of your professional staff have come to you to discuss problems that may affect the firm's independence. Neither of these situations has been specifically answered by the AICPA Professional Ethics Division. Therefore, you must reach your own conclusions as to what to advise your staff members, and what actions, if any, are to be taken by the firm.

Case 1: Don Moore, a partner in the firm, has recently moved into a condominium that he shares with his girlfriend, Joan Scott. Moore owns the condominium and pays all the expenses relating to its maintenance. Otherwise, the two are self-supporting. Scott is a stockbroker, and recently she has started acquiring shares in one of the audit clients of this office of the public accounting firm. The shares are held in Scott's name. At present, the shares are not material in relation to her net worth.

Case 2: Mary Reed, a new staff auditor with the firm, has recently separated from her husband. Mary has filed for divorce, but the divorce cannot become final for at least five months. The property settlement is being bitterly contested. Mary's husband has always resented her professional career and has just used community property to acquire one share of common stock in each of the publicly owned companies audited by the office in which Mary works.

For each case, you are to:

a. Set forth arguments indicating that the firm's independence has not been impaired.

b. Set forth arguments indicating that the firm's independence has been impaired.

c. Express your personal opinion. Identify those arguments from part (a) or part (b) that you found most persuasive. If you believe that the firm's independence has been impaired, make suggestions about how the problem might be resolved.