Individual in a position to influence the attest engagement

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#1
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The independence rules state that a covered person includes an Individual in a position to influence the attest engagement. By definition this includes one who "consults with the attest engagement team regarding technical or industry-related issues specific to the attest engagement."

AU-C Section 220.A20 states that an engagement team may consult with outside the firm.

The AICPA FAQ On Non-Attest Services confirms that providing services to an attest client in the application of ASC 740 would not impair independence.

I've been helping another firm with the application of ASC 740. This might include reviewing filed tax returns, client workpapers, and even preparing the provision. Sometimes the client would engage me directly othertimes I consult with the attest team.

At all times by services are more consulting services specific to ASC 740. I would not consult with the audit team regarding the audit procedures, testing thresholds, etc and no formal opinion is given.

With all things though there could be some gray areas. Anyone else have to deal with this or have any advice on staying outside of these rules?

I'm thinking as long as I don't perform substantive audit procedures then I would not be consulting with the audit team in a capacity specific to the attest engagement. If AU-C 220.A20 allows the attest team to consult then this shouldn't pull in every consultant into being an auditor.
 

#2
Nilodop  
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Would being a covered person have practical implications to you?
 

#3
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Being a covered person does have an impact on my practice as I often end up performing other non-attest work for the same client via referral from the other audit firm.

The non-attest services I perform are permissible and would not impair independence but there is still some hoops to go through. I would need to revise the engagement letter to include that management has oversight over the engagement among other requirements. Not a huge deal but still one more thing to document and comply with.

I should add that the AICPA FAQ on Non-Attest Services http://www.aicpa.org/interestareas/professionalethics/resources/tools/downloadabledocuments/nonattestservicesfaqs.pdf

discusses ASC-740 services twice. The first time is proposing entries to correct the provision. This the FAQ states is not providing bookkeeping services and instead is routine part of the audit engagement. The second time is consulting on the application of ASC 740 which is not an attest service.

So as you can see none of this is straight forward. I could see myself performing the following

1) Audit work by proposing journal entries (or at least suggesting one is needed)
2) Non-attest work by consulting on ASC 740
3) Auditor's specialist when consulting on tax filings
4) Covered person when any of the above could influence the attest engagement

Of course If I could get the client to engage me directly should be pretty easy to avoid being a covered person and just have a consulting engagement with them directly. This might not always be possible though.
 

#4
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FarberCPA wrote:The independence rules state that a covered person includes an Individual in a position to influence the attest engagement. By definition this includes one who "consults with the attest engagement team regarding technical or industry-related issues specific to the attest engagement."

AU-C Section 220.A20 states that an engagement team may consult with outside the firm.

The AICPA FAQ On Non-Attest Services confirms that providing services to an attest client in the application of ASC 740 would not impair independence.

I've been helping another firm with the application of ASC 740. This might include reviewing filed tax returns, client workpapers, and even preparing the provision. Sometimes the client would engage me directly othertimes I consult with the attest team.

At all times by services are more consulting services specific to ASC 740. I would not consult with the audit team regarding the audit procedures, testing thresholds, etc and no formal opinion is given.

With all things though there could be some gray areas. Anyone else have to deal with this or have any advice on staying outside of these rules?

I'm thinking as long as I don't perform substantive audit procedures then I would not be consulting with the audit team in a capacity specific to the attest engagement. If AU-C 220.A20 allows the attest team to consult then this shouldn't pull in every consultant into being an auditor.


My gut, just an opinion, tells me you are not independent in a true sense of the word. You have an indirect interest in seeing a positive outcome from this client and from the CPA firm.

I think your posting this tells you the same... but were hoping for an opinion contrary to mine.
 


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