Direct financial interest definition
/What is a Direct Financial Interest?
A direct financial interest is a financial interest that is owned directly by an individual or entity, or which is under the control of an individual or entity, or which is beneficially owned through an investment vehicle or other intermediary.
The concept is an essential one for auditors, who need to be aware of their financial interests in attest clients. Direct financial interests will generally impair an auditor’s independence in relation to an attest client, which will require the auditor to terminate the engagement with the client. In this case, auditor independence would be impaired, because it presents the possibility of impairing the person’s objectivity and independence in regard to the client.
Examples of Direct Financial Interests
Here are several examples of situations in which a person has a direct financial interest:
Owning the stock issued by a client.
Having a financial interest in a trust, of which you are a trustee.
Having a financial interest in partnership, of which you are the general partner.