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The environment in which auditors practice today is ever-changing and complex. Business transactions and business relationships no longer span across communities, cities, states and the U.S., but around the world. The move toward a global economy brings additional risks for auditors when evaluating and documenting independence. To assist auditors with this critical process, the AICPA has developed this practice aid, which consists of two independence review tools that address two diverse sets of auditor independence rules.
The first review tool addresses requirements of Rule 101, Independence (AICPA, Professional Standards, vol. 2, ET sec. 101 par. .01), of the AICPA Code of Professional Conduct and its related rulings and interpretations. This rule applies to all engagements requiring independence under AICPA Professional Standards. Some examples are the following:
The second review tool addresses the U.S. Government Accountability Office independence rules, which apply to the following engagements:
Each of the review tools are divided into two sections. The first section is a series of questions designed to help auditors identify potential independence issues. The second section suggests possible follow-up actions that auditors may consider in addressing an independence issue.
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Scope of This Practice Aid
.03 This practice aid addresses two diverse sets of auditor independence rules and is categorized into two independence compliance tools. The first independence compliance tool (the compliance tool) addresses the requirements of Rule 101, Independence (AICPA, Professional Standards, vol. 2, ET sec. 101 par. .01), of the AICPA Code of Professional Conduct (code)and its related rulings and interpretations. This rule applies to all engagements requiring independence under AICPA Professional Standards. Some examples are the following:
| • | Audits and reviews of financial statements | |
| • | Compilations of financial statements in which the firm does not disclose a lack of independence | |
| • | SAS No. 70 reports issued under AU section 324, Service Organizations (AICPA, Professional Standards, vol. 1) | |
| • | Other attestation services, such as agreed upon procedures | |
.04 The second compliance tool addresses the U.S. Government Accountability Office(GAO) independence rules, which apply to financial statement audits; attestation services; and performance audits of government entities, programs, and federal awards administered by contractors, not-for-profit entities, and other nongovernmental entities. These entities also are subject to the AICPA rules described in part I of the compliance tool. To streamline the compliance process, to the extent the AICPA rules are identical to the GAO rules, the GAO compliance tool generally will not repeat those questions. Rather, it will address only those matters that have not already been addressed in the AICPA compliance tool.
.05 If the client is privately owned and not subject to government audit standards, only the AICPA compliance tool should be completed.1
SEC and PCAOB Independence Rules
.06 This practice aid does not address the independence rules of the Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board(PCAOB). Auditors of issuers are required to comply with the SEC and PCAOB rules on auditor independence.2
1. Practitioners also should be aware of various other regulations that may apply to engagements. See appendix C, "Sources of Guidance," for further information.
2. For additional discussion on Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board rules on auditor independence, see Independence Compliance: Checklists and Tools for Complying With AICPA, SEC, and PCAOB Independence Requirements.
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