Mike and Mike, CPA, has a manufacturing client, Solar Technologies, Inc. (STI), that is a small, owner-managed business with annual revenues of approximately $8 million. STI employs a bookkeeper but is not large enough to employ a CPA in-house. STI regularly asks Lucy, the partner on the engagement, for advice on accounting issues, and Mike and Mike drafts the financial statements for the company. The client reviews the financial statements before they are printed by Mike and Mike with an audit opinion attached. During the current year, STI asked Mike and Mike to assist the company by rendering a business valuation service. STI is asking Mike and Mike to (1) estimate the value of STI and (2) consult with STI in the form of making recommendations on steps that STI can take that will grow the value of the business.

Since Mike and Mike is preparing the financial statements for STI, is Mike and Mike independent with respect to STI? What conditions, if any, must Mike and Mike meet in order to be independent with respect to STI?