Suppose you were a CPA and you had invested in IBM when IBM was not one of
your firm's clients. Two years later, after IBM's stock price had fallen considerably,
your firm won the IBM audit contract. You will not in any way be involved in working
with the IBM audit, which will be done by one of your firm's other offices in a
different state. You know that your firm's rules, as well as U.S. law, require that you
sell your shares immediately. If you do sell immediately, you will sustain a large loss.
Do you think this is fair? What would you do?
Is it fair? From the CPA that is holding the stock, it seems unfair. But it really isn't. In fact, the loss has already occurred, right? The loss didn't happen because they got the client. They were unrelated. Yes, the fact that the loss much now be realized (by selling it) prevents the holder from perhaps enjoying a ...
The issue of independence is discussed in everyday language suitable for a novice and why this is a fair requirement.