Question

Please discuss under what circumstances a CPA auditor's independence is impaired with publicly held clients as compared to privately held clients.

Answer 1

CPAs should consider the independence and ethics rules governing the profession. The information and links on this page are provided as resources to assist you in understanding and adhering to these rules.

Interpretation 101-3 – Performance of nonattest services under Rule 101, Independence provides guidance on how the provision of non-attest services (such as bookkeeping and tax) can impact independence with respect to attest clients. The interpretation:

• Reinforces the ethics committee's longstanding position that when providing nonattest services in order for the management participation threat to be sufficiently mitigated, an attest client must designate an individual who possesses suitable skill, knowledge, and/or experience, preferably within senior management, to oversee the services, which ensures that the client has overall responsibility for the services being performed.
• Requires members document their understanding with the client regarding the member’s responsibilities, the objectives of the engagement (and any limitations), services to be performed and the client’s acceptance of its responsibilities.
• Provides guidance on some specific non attest services including:
  
  • Bookkeeping,
  • Non tax disbursements (e.g., payroll)
  • Benefit plan administration
  • Investment advisory or management
  • Corporate finance, consulting or advisory
  • Executive or employee search
  • Business risk consulting
  • Information systems design, installation or integration
  • Tax Compliance (i.e., preparation of a tax return, transmittal of a tax return and any related tax payment to the taxing authority, signing and filing a tax return, and authorized representation of clients in administrative proceeding before a taxing authority)
  • Forensic accounting (e. g., expert witness services, litigation consulting services and investigative services)
  • Internal audit