CPA Javier's father declared personal bankruptcy and

hired him to fill the newly created position of director of financial reporting.

B$\mathrm{.}51$ SEC Independence and Nonaudit Services. Is independence impaired on these SEC filing

audits according to SEC independence rules regarding nonaudit services?

a$.$ CPA Dakota Tidrick is a second$-$year staff auditor on the Section Co$.$ audit. Upon the

audit completion date in January. Tidrick drafted the balance sheet, income statement,

comprehensive income statement, statement of cash flows, and notes for review by the

engagement partner before the auditors' report was finalized.

b$.$ CPA Mel Carnes is a manager in the firm's consulting division. He spent $100$ hours with

the Section Co$,$ audit client on an accounts payable information system study, which

involved selecting the preferred software and supervising Section Co$.\text{'}$s employees in

startup operations.

c$.$ CPA Nicky Webber, working in the public accounting firm's asset valuation consult$-$

ing division located in Chicago, prepared for Section $Co.$ an appraisal of the fair value

of assets purchased in Section Co$.\text{'}$s merger with the Group Co$.$ These valuations were

then audited by the engagement team located in Dallas in connection with the purchase

accounting for the merger.

d$.$ CPA Fran Young is the engagement partner on the Section Co$.$ audit and is an actuarial

consultant in the firm's consulting division. Young personally audited the client's post$-$

employment benefits calculations, which had been prepared by Section Co$.\text{'}$s actuaries.

e$.$ Section Co$.$ appointed its own employee, certified internal auditor $($CLA$)$ Pat Mumta, to be

director of internal auditing with complete responsibility for planning, management, and

review of all internal audit work. Mumta engaged Section Co$.\text{'}$s independent public account$-$

ing firm to supply staff to perform all operational audit studies of efficiency and effectiveness

in Section Co$.\text{'}$s domestic subsidiary companies. The public accounting firm used half of

these same staff professionals to work on the audit of Section Co$.\text{'}$s financial statement audit.

f$.$ CPA Dale Churyk is the partner in charge of the Dallas office where the Section Co$.$ audit

is managed $($by engagement partner Jack$).$ Churyk has no direct role on the audit engage$-$

ment team. However, Section Co$.$ relies on Churyk to prepare the confidential papers for

the board of directors' stock options and sign the release forms for option grants.

g$.$ CPA Robin Mantzke works in the executive search department of the public account$-$

ing firm's consulting division, located in New York City. In connection with Section

Co$.\text{'}$s hiring of its new vice president for marketing. Mantzke checked the references on

the lead candidate Smith and performed a thorough background investigation that led to

the firm's advice that Smith was the best person for the appointment. Section Co$.$ board

members investigated other candidates and hired Smith in Dallas without further interac$-$

tion with Mantzke.

h$.$ Section Co$.$ completed a private placement of long$-$term bonds during the year under

audit. The bonds were distributed to $40$ qualified$-$exempt investors through the brokerage i$.$ The public accounting firms tax consulting division prepares Section Co$.\text{'}$s export$-$import tax report, which involved numerus interptations of complicated export$-$import tax law provisions.