Auditors are allowed to have an indirect financial interest in an audit client, such as ownership of stock in a client's company by the auditor's brother, as long as the amount of the financial interest is immaterial to the brother.

Question

Quizplus · Accepted Answer

According to the independence rules set by the PCAOB, auditors are allowed to have indirect financial interests in an audit client as long as the amount is immaterial to them or their close family members, such as siblings. Therefore, in the given scenario, the auditor's ownership of stock in a client's company by the auditor's brother would not be considered a violation of independence as long as the amount is immaterial to the brother.

Auditors Are Allowed to Have an Indirect Financial Interest in an Audit