Auditing & Attestation (AUD)

What are the six Principles of the AICPA Code of Professional Conduct?

Responsibilities; The Public Interest; Integrity; Objectivity and Independence; Due Care; and Scope and Nature of Services. They are aspirational and not directly enforceable, unlike the Rules.

Under the AICPA Code, who is bound by the Independence Rule?

Only members in public practice who perform attest engagements (audits, reviews, examinations, certain agreed-upon procedures) — and their firm and covered members. Members in business and those performing only non-attest services are subject to Integrity and Objectivity but not the Independence Rule.

Define a 'covered member' under the AICPA independence rules.

A covered member is: (1) an individual on the attest engagement team; (2) an individual who can influence the engagement (e.g., a reviewer or those in the chain of command); (3) a partner or manager who provides 10+ hours of nonattest services to the client; (4) a partner in the office where the lead engagement partner practices; (5) the firm and its benefit plans; and (6) entities controlled by any of the above.

Under the AICPA Code, what financial interest in an attest client impairs independence for a covered member?

Any direct financial interest (regardless of amount) impairs independence. A material indirect financial interest also impairs independence; an immaterial indirect interest does not.

How does a direct financial interest differ from an indirect financial interest for independence?

A direct interest is owned/controlled by the member (e.g., shares held personally or through a self-directed account). An indirect interest is held through an intermediary the member does not control (e.g., a diversified mutual fund). Direct interests impair regardless of amount; indirect interests impair only if material.