Auditor Independence Utilize the AICPA website to respond,
however to respond to this case, please consult not only auditing
standards AUC but also the AICPAs revised Code of Conduct.Facts: Tim Smith is an audit partner in a partner in a CPA firm,
and Tim recently invested in a diversified mutual fund managed by
Fidelity Investments. He owns less than of the total shares
outstanding of the mutual fund itself. One of the mutual funds
holding is shares of Lava Corp. Lava Corp is one of Tims clients
and is a nonpublic company.Required: What guidance tells Tim that he must be independent of
Lava Corp, and does his investment impair his firms independence
on this audit?Respond to these questions in the form of an issues memo.
Explain your analysis, citing from the guidance to support your
response. If the guidance states that a covered member must be
independent, you will need to define covered member to fully
explain your analysis. Make a clear, reasoned argument, using a
logical discussion of relevant guidance. You can use the following
headers to begin your response.Issue : What guidance requires Tim to be independent of Lava
Corp?Issue : Does this investment impair Tims firms independence
on this audit?
