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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 Securities and Exchange Commission (SEC) independence rules, including rules of the Public Company Accounting Oversight Board (PCAOB) and the Independence Standards Board (ISB), when applicable. SEC independence rules 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. First, the 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 compliance tool also addresses the SEC independence rules, which apply to audits, reviews, and other attest services provided to public companies and other entities whose financial information is filed with the SEC. These engagements also are subject to the AICPA rules described in the compliance tool. To streamline the compliance process, the compliance tool will address SEC independence rules only to the extent that they exceed the AICPA requirements. Hence, completing the entire compliance tool serves to address both sets of rules.
.05 If an engagement is not subject to SEC independence rules, only the AICPA portion of the compliance tool should be completed.1
1. Practitioners also should be aware of various other regulations that may apply to engagements. See appendix C, "Sources of Guidance," and appendix G, "Other Independence Rules and Issues," for further information.
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