Explain how the rules concerning stock ownership apply to partners and professional staff. Give an example of when stock ownership would be prohibited for each.

Explain how the rules concerning stock ownership apply to partners and professional staff.

A.

A partner in the office of the partner responsible for an audit engagement cannot own stock in that audit client. A professional staff member can own stock in a firm's audit client as long as he or she does not participate in the audit engagement.

B.

A partner can own stock in an audit client, as long as (a) he or she cannot influence the audit engagement and (b) he or she is not in the same office as the partner responsible for the audit engagement. A professional staff member cannot own stock in an audit client if he or she is assigned to the engagement or if he or she becomes a partner if the office of the partner responsible for the audit engagement.

C.

A partner can own stock in an audit client as long as the firm of the partner is not the firm performing the audit engagement. A professional staff member can own stock in a firm's audit client as long as he or she discloses the ownership to the PCAOB and only performs menial tasks on the audit engagement.

D.

Both A and B apply.

Give an example of when stock ownership would be prohibited for each. Start first with a partner example and then continue with the professional staff example.

A.

A partner in the New York City office is the partner responsible for an audit engagement for a worldwide corporation with offices in Texas. A different partner in the Austin office comes for a visit to the New York City office and currently owns shares of stock in the worldwide corporation.

B.

A partner in the Los Angeles office relocates to the San Diego office so he or she can continue to own stock in a corporation. A different partner in the Los Angeles office is responsible for the audit of the corporation.

C.

A partner in the San Francisco office owns one share of stock of a client whose audit is conducted by a different partner in the San Francisco office.

D.

All of the above.

A.

An audit manager owned stock in a client prior to joining the firm. The audit manager is currently the manager of this client's audit. The partner responsible for the audit is aware of the prior ownership.

B.

An audit manager owns stock in a client whose audit is performed by the office where the audit manager works. The manager is promoted to partner mid-year.

C.

An audit manager who gifts all his shares of stock to a non-family member so he or she can be assigned to the audit engagement.

D.

An audit manager located in Orlando has multiple nieces and nephews who own stock in an audit client of his firm. The audit and responsible partner are located in Chicago.