independence issue?

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#1
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California
i may know the answer to this question already but just want to hear other's take. So i have a client that's been with me for almost 10 years. during this span, they have grown 5 fold, eventually decided to go public. I was their financial auditor up to 2015. I have maintained a very good relationship with the management so i still do work for 4 subsidiaries that account for less than 10% of the revenue. we do annual reviewed FS for the 4 small subs and tax return work. The current auditor feels that those entity are relatively small, so they will take my reviewed FS number and consolidate with the main.

I do not get to see the final consolidated numbers anymore, we don't do any tax return work for the main big entities. I don't have any access to "privileged info" other than the 4 small sub that i work on.

So the big question, can i buy this company's stock? my conservative nature tells me i shouldn't.
 

#2
Joan TB  
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Texas
From the Texas State Board:
A person in the performance of professional accounting services or professional accounting work, including those who are not members of the AICPA, shall conform in fact and in appearance to the independence standards established by the AICPA and the board, and, where applicable, the SEC, the U.S. GAO, the PCAOB and other national or international regulatory or professional standard setting bodies.


I realize that your are in another state, but I think the AICPA rule is the same as Texas, and your state's rule is also probably the same as well. You are not allowed to own a financial interest in an entity for whom you perform an attest service. It would violate the independence requirement. And buying the stock AFTER you have been doing their review seems to imply some level of insider knowledge that doesn't look good either. Go with your gut - NO.
 

#3
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296
Joined:
7-Jul-2014 6:39pm
Location:
California
Yeah you are right. It's just that it's not everyday that I get to know a company so well...I don't need to read any 10q or 10k...I know them by heart.

So tempting though...
 

#4
MWEA  
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Location:
Minnesota
I’ll wait for your PM with the ticker symbol.
 


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