American Institute of Certified Public Accountants (AICPA) Practice Exam

Can a member in public practice serve as a director of a consumer credit company?

1. They cannot serve under any circumstances.

2. Only if they do not audit the consumer credit company.

3. They can only participate if it is publicly disclosed.

4. They can serve if there is no financial interest.

The correct answer is: Only if they do not audit the consumer credit company.

The option indicating that a member in public practice can serve as a director of a consumer credit company only if they do not audit that company is correct. This aligns with the principles of maintaining independence while fulfilling professional duties. When a member of public practice, such as a CPA, audits a company, they are required to maintain independence from that entity both in fact and appearance. However, serving as a director does not inherently violate this independence as long as there is no audit relationship. The independence and conflict of interest rules established by professional standards are designed to prevent situations where personal financial interests could impair an auditor's objectivity and impartiality. Therefore, if a public practice member does not have auditing responsibilities for the consumer credit company, they can take on a director role without compromising their independence. Other options outline potential restrictions or conditions, but they do not accurately reflect the flexibility allowed when there is no auditing relationship involved. Overall, the focus on maintaining independence while allowing for participation in governance roles underscores the commitment to ethical standards in public practice.