Maintaining Independence as a CPA: Julie's Dilemma

What factors can impair Julie's independence as a CPA auditing the company where her sister Lisa works?

- A financial interest in the company

- A familial relationship with an employee

- A personal or business relationship that creates a conflict of interest

Answer:

Julie's independence as a CPA is impaired if she has a financial interest in the company, has a familial relationship with an employee, or has a personal or business relationship that creates a conflict of interest.

To maintain independence, Julie, the CPA auditing the company where her sister Lisa works, should avoid situations where her independence is impaired. Independence is impaired if Julie has a direct financial interest in the company, a close familial relationship with an employee, or if she has a personal or business relationship that creates a conflict of interest. For example, if Julie owns shares in the company, her independence would be compromised.

It is crucial for CPAs like Julie to adhere to professional ethics and standards to ensure the integrity of financial reporting. By avoiding conflicts of interest and maintaining independence, CPAs uphold the trust and confidence of stakeholders in the financial information they provide.