Question 9

You serve on the audit engagement team for Company A. Your spouse used to work for Company A and was awarded some stocks in the entity a while ago as an employee benefit. May your spouse continue holding these stocks?

No, because spouses are prohibited from obtaining any stocks through an employee benefit plan

No, because covered persons may not hold direct investments in a restricted entity

Yes, because they were awarded while your spouse was employed there

Yes, because they are immaterial to your net worth

Question 10

John is a covered person with respect to our SEC audit client, Big Bank. He would like to take an additional mortgage loan for home improvements including a new roof for his house. Is John permitted to obtain this mortgage from Big Bank?

Yes; he may obtain the mortgage as long as it is not material to his net worth

No; he is a covered person and may not obtain an additional mortgage from Big Bank for this purpose

Maybe; he may obtain the mortgage from Big Bank if there are no other suitable lenders available

Yes; he is permitted to obtain a new mortgage loan with Big Bank because it can be grandfathered

Question 11

Jorge has heard a lot about the benefits of cryptocurrencies from his friends and family and decides to purchase Bitcoin. Which of the following steps must he take to ensure his independence?

He must consult with his Ethics and Independence Partner prior to the purchase

He must report the Bitcoin in KICS

He must ensure that the Bitcoin is not material to his net worth

None of the answers are correct; Bitcoin is not reportable in KICS

Question 12

Which of the following would not cause a tax manager to become a covered person with respect to a restricted entity?

They provide two hours of services on the audit engagement for the restricted entity

They relocate to the same office as the Lead Audit Engagement Partner for the restricted entity

They charge time to the audit engagement as a tax specialist

They provide more than ten hours of non-audit services to the restricted entity