The case of Mick's participant son

Ethics

Charles Selcer, CPA, MBA | February/March 2017 Footnote

Emo Franco owns General Lease Emo Franco, Inc., a farm equipment leasing company. The company's financial statements are audited by Hickory, Dickory & Dock CPAs (HDD). In 2016, the company's profit-sharing plan reached the point where the plan needed to have an audited financial statement. One of HDD's partners, Mick Dickory, has a dependent son, Dick Dickory, who works at Emo's company and is a participant in the profit-sharing plan?

Q.  Can HDD be independent and audit the plan?

A.  Yes, if:

  1. The son is not in a key position at the company.
  2. All employees are given the opportunity to participate in the plan.
  3. The son is not a trustee.
  4. The son does not supervise or participate in the plan investment decisions or selection of investment options.
     (See ET 1.270.030.01)