Tax Independence – Not Just For Public Companies
The tenth anniversary of the enactment of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley) reminds us of the many changes that have occurred during the last 10 years in the accounting industry.
The scandals of Enron, WorldCom, and others helped lead to Sarbanes-Oxley, and also helped the American Institute of Certified Public Accountants (AICPA) and the Securities and Exchange Commission (SEC) create stricter professional ethics requirements in working with audit clients. The AICPA provides the framework for professional ethics in the “Code of Professional Conduct.”
Specifically, ET 100-1.06 in the Code of Professional Conduct defines independence as:
1. Independence of mind – The state of mind that permits the performance of an attest service without being affected by influences that compromise professional judgment, thereby allowing an individual to act with integrity and exercise objectivity and professional skepticism.
2. Independence in appearance – The avoidance of circumstances that would cause a reasonable and informed third party, having knowledge of all relevant information, including safeguards applied, to reasonably conclude that the integrity, objectivity, or professional skepticism of a firm or a member of the attest engagement team had been compromised.
Further in ET 100-1.13, independence concerns related to self-review are identified.
Self-review threat – Members reviewing as part of an attest engagement evidence that results from their own, or their firm’s, non-attest work, such as preparing source documents used to generate the client’s financial statements.
The Metropolitan Corporate Counsel
December 2012 Issue
Read the entire article here.