Ryan and Darla are married. Darla is partner at Ernst and Notold, CPAs, where she serves as the lead engagement partner on the audit of Mortis Company. Darla does not own any stock in Mortis Company, but Ryan owns 1% of Mortis Company’s preferred stock. Ryan’s ownership of Mortis stock is not material to his net worth.
a. Does Ernst and Notold, CPAs satisfy the independence standard to audit Mortis? And Explain?
b. Would your answer be the same if Ryan was Darla’s brother instead of her husband? And Explain?
c. Would your answer be the same if Ryan was Darla’s grown son who is married to a highly successful investment banker? And Explain?