Independence standards affect a CPA in performing a variety of professional services for a client whenever the CPA also performs audit and other attest-related services (i.e., reviews) for the client. Certain high-profile fraudulent cases have heightened the public's awareness of how important auditor independence is in the performance of various engagements. In audits conducted according to generally accepted auditing standards (GAAS), or the standards of the Public Company Accounting Oversight Board (PCAOB), audit teams are charged with the duty of giving reasonable assurance that their client's financial statements are free of material misstatement (whether caused by error or fraud). Auditor independence is a key element in providing such an assurance.

In this program, Independence Requirements for CPAs, we will focus on the scope and conceptual framework for independence standards. This course will explain the different regulatory requirements, as well as interpretations published to help auditors understand the standards set forth concerning auditor independence.

Bisk Alert: The AICPA Professional Ethics Division issued Proposed Revised and New Interpretations and Proposed Deletion of Ethics Rulings on June 29, 2012. Comments to the exposure draft will be considered by PEEC at its October 25-26, 2012, open meeting and final changes to Interpretation 101-3 under Rule 101 are expected to take effect subsequent to that meeting. Additional changes pending affect Rules 501 and 502 and ethics rulings under Rule 102, 501, and 502. The exposure draft can be reviewed at: http://www.aicpa.org/interestareas/professionalethics/community/exposuredrafts/downloadabledocuments/2012juneomnibusproposalaicpaprofessionalethicsdivision.pdf

Use of Materials

DVD
The user should begin by watching the DVD segment, if any, for the chapter before reading the text. The user may wish to make notes of the most important concepts and any terms that are new. Next, the user should review the learning objectives at the beginning of the chapter and read the chapter. The user should work through each of the examples. It may be helpful to highlight important material and/or to make additional notes. Next, the user should complete the study questions at the end of the chapter and review the answers. If the user answers a study question incorrectly, s/he should review the section of the text that is indicated at the end of the explanation to the study question to assure comprehension of the material. The user should review the learning objectives once more to consider achievement of the objectives. After the user has finished watching the DVD and reading the text and working through the study questions, s/he may wish to review her/his notes and any sections of the text or DVD that were difficult. When the user is ready, s/he should complete the quizzer. Reviewing notes periodically will increase retention of the material.

Online
The user should begin by watching the streamed video segment, if any, or listening to the streamed audio segment, if any, for the chapter before reading the text. The user may wish to make notes of the most important concepts and any terms that are new. Next, the user should review the learning objectives at the beginning of the chapter and read the chapter. The user should work through each of the examples. After the user has studied each chapter, s/he should click on the link at the left to complete the interactive study questions. If the user answers a study question incorrectly, s/he should review the section of the text that is indicated at the end of the explanation to the study question to assure comprehension of the material. The user should review the learning objectives once more to consider achievement of the objectives. After the user has finished watching the streamed video, if any, or listening to the streamed audio, if any, and reading the text and working through the study questions, s/he may wish to review her/his notes and any sections of the text or video/audio, if any, that were difficult. When the user is ready, s/he should click on the link to the left to complete the quizzer. The user's CPE certificate will be provided immediately upon successful completion of the quizzer.

Chapter 1 focuses on the definition of, and scope of, auditor independence.

Chapter 2 examines the conceptual framework for independence standards.

Chapter 3 reviews the independence standards of the AICPA that relate to family and business relationships with audit clients.

Chapter 4 examines Interpretation Nos. 101-2 and 101-3.

Chapter 5 focuses on other interpretations concerning auditor independence.

Chapter 6 covers the regulatory standards issued by the SEC and PCAOB.

Chapter 7 discusses regulatory actions against CPA firms for independence violations.

Chapter 8 covers the independence rules mandated by the Government Accountability Office.

Appendix A gives examples of nonattest services.

Appendix B contains a bibliography.

Throughout this program, the user will find explanations and discussions regarding some of the issues that often face practitioners. In order to enhance the user's comprehension of the material and highlight important practical considerations, this program includes the following designations:

A Biskalert is intended to warn the practitioner of a particular situation that may require action or other consideration by the client or the practitioner on behalf of the client.

A Biskpoint presents analysis or commentary that attempts to explain or clarify authoritative guidance.

A Bisktip provides practical advice that may be used to help improve client service or service to the practitioner's organization.

• Discuss the meaning of independence and when it may be impaired

• List the various organizations that are involved in establishing independence standards

• Explain what is meant by the AICPA's risk-based approach to evaluating independence

• Describe when threats to independence may impair independence in the performance of professional services

• Discuss the safeguards that should exist to mitigate threats to independence

• Explain what it means to be independent in fact and appearance

• Explain which nonaudit services can be performed for an audit client without impairing independence and which are prohibited

• Discuss the requirements imposed on a CPA and a client when the rules permit nonattest services to be provided to attest clients

• Discuss when threatened or actual litigation between a covered member and a client may create an adverse interest threat that may impair independence

• Explain when independence is required when auditing a governmental entity

• Discuss how relationships with direct and indirect superiors in an alternative practice structure may impair independence

• Explain the application of independence rules to affiliates, networks, and network firms

• Explain PCAOB audit and independence standards

• Discuss the SEC overarching principles underlying independence

• Explain the differences in the rules of the SEC and AICPA

• Explain the conceptual framework for independence under GAO standards

• Describe possible threats to independence and the safeguards to prevent impairment of independence

• Describe the possible impairments to independence when nonaudit services are provided and steps to ensure that independence exists

• Discuss when independence may be impaired because of organizational independence issues