Video: Conflict of Interest Provisions

This lesson covers the conflict of interest provisions as per SACS 2002, focusing on restrictions and allowances for directors or executive officers of an issuer. It discusses the prohibition of personal loans not in the ordinary course of business, the allowance of perquisite compensation, and the encouragement of owning more than 10% of common stock. Additionally, the lesson addresses when personal credit loans are permitted – if they adhere to the ordinary course of business or if the same terms of the loan are offered to the general public without preferential treatment. By understanding these provisions, individuals can better grasp the reasons behind these rules and the importance of avoiding conflicts of interest within a company.

"Examprep.ai helped me pass all 4 CPA exams on the first try. I highly recommend. I especially like the feedback and ratings the software provides so I know where to focus my time."

Daniel H., CPA

"I can't recommend ExamPrep.ai enough. Nick's lessons turned concepts I struggled with into strengths. I was able to pass FAR right before other exams expired!"

Andrew K, CPA

"I just want to say thank you for the great lesson videos. I couldn't stay awake through lectures of another course. After watching all your FAR lessons I was finally able to pass!"

Alyssa M., CPA Candidate

Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

Cite this lesson

Link to this page

[[ citeExample ]]

Copy to clipboard

Copy URL to clipboard

Copy HTML to clipboard

Let's talk about conflict of interest provisions. So per SACS 2002, directors or executive officers of an issuer are prohibited from a personal loan, receiving a personal loan from the issuer not in the ordinary course of business. This is again to not have any conflicts of interest. Now, if it's in the ordinary course of business, that's fine. If one of the benefits of working for the company is that you get a personal loan with the company, cool, right? That's within the ordinary course of business. However, anything in excess, that is going to be disallowed. These individuals are permitted to receive prerequisite compensation, right? You want to sign on bonus, something like that. Owning more than 10% of common stock or any form of equity. This is actually encouraged. You actually want management to own stock in the company, because if they own stock in the company, then they're going to be incentivized to benefit the company, to work hard and make sure the company's doing well. If they're just getting paid a straight salary, well, they're not really going to work as hard because they're just getting paid a salary regardless of how well the company does. So this can be a trick. You might think, oh, it's not good. But if you think about it, it actually makes sense why you'd want them to actually own a good amount of the company. Next. So yeah, they're permitted to own as much as they want of the company. Then we've got receiving, they're permitted to receive a personal credit loan from the issuer if it's in the ordinary course of business, as we said, or if the same terms and conditions of the loan are offered to the public with no preferential treatment to the director

Unlock the full video transcript and subtitles support with a free account!

Get more from this lesson

Create an account 7-day free trial. No credit card required.

Ethics & Independence

Module: 3 Concepts, 42 Videos

AICPA Code of Professional Conduct Overview

1:04

AICPA Code of Professional Conduct Objectives

2:42

Introduction to AICPA Code of Professional Conduct

1:55

AICPA Requirements of Independent Auditors