Introduction1. An individual on the client’s attest engagement team;2. An individual in a position to influence the client’s attest engagement;3. A partner or manager who provides more than ten hours of nonattest services to that attest client;4. A partner in the office in which the lead attest engagement partner primarily practices in connection with the client’s attest engagement;5. The firm, including the firm’s employee benefit plans; orApplying the Rules—Family MembersBusiness RelationshipsFee IssuesOther GuidanceAICPA Plain English Guide to IndependenceUpdated - January 1, 2004TABLE OF CONTENTSNOTICE TO READERSPREFACE Purpose of this guideConventions and key terms usedINTRODUCTIONFor which services must my firm be independent?In addition to the AICPA, who else sets independence rules?APPLYING THE RULES—COVERED MEMBERS AND OTHER FIRM PROFESSIONALS How do the independence rules apply to me?Do any of the rules apply to me if I am not a covered member?What if I was formerly employed by a client or I was a member of the client’s board of directors?What rules apply if I am considering employment with a client?What if I accept employment or a board position with a client? APPLYING THE RULES—FAMILY MEMBERS When is my family subject to the rules?What about my other close relatives?FINANCIAL RELATIONSHIPSWhen do my financial interests—or my family's—impair independence?What are the rules that apply to my mutual fund investments—and those of my family—when my firm audits those mutual funds?Which rules pertain to my mutual fund investments—and those of my family—if my firm audits companies held in those mutual funds?May I have a joint closely held investment with a client?May my family or I borrow money from or lend money to a client?May I have a brokerage account with a client?May I have a bank account with a client?May I have an insurance policy with a client?May I accept a gift from a client?BUSINESS RELATIONSHIPSWhich business relationships with a client impair independence?NONATTEST SERVICES Which rules describe the nonattest services that my firm and I may or may not provide to attest clients?What are the rules about performing bookkeeping services for a client?May my firm provide internal audit assistance to a client?May my firm provide valuation, appraisal, or actuarial services to a client?May my firm provide investment advisory services to a client?May my firm design or implement an information system for a client?FEE ISSUESWhat types of fee arrangements between my firm and a client are prohibited?Is independence affected when a client owes the firm fees for professional services the firm has already provided?Does being compensated for selling certain services to clients affect my independence? AICPA Plain English Guide to IndependenceUpdated - January 1, 20042Does it matter if a significant proportion of my firm's fees come from a particular client?OTHER GUIDANCEWhat other guidance on independence and related topics exists?Where can I find further assistance with my independence questions?AICPA Plain English Guide to IndependenceUpdated - January 1, 20043Notice to ReadersThis publication is designed to provide illustrative information with respect to the subjectmatter covered. It does not establish standards or preferred practices. The material was prepared by AICPA staff and has not been considered or acted upon by senior technical committees or the AICPA Board of Directors and does not represent an official opinion orposition of the AICPA. It is provided with the understanding that the author and publisherare not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. The author and publisher make no representations, warranties orguarantees as to and assume no responsibility for the content or application of the material contained herein, and expressly disclaim all liability for any damages arising out of the use of, reference to, or reliance on such material.Copyright (c) 2003 by the American Institute of Certified Public Accountants, Inc.License is hereby granted for reuse or reprint of this matter for purposes other than resaleor commercial exploitation, provided AICPA copyright statement and acknowledgment ofany modification is displayed in any circumstance of reuse or reprint.AICPA Plain English Guide to IndependenceUpdated - January 1, 20044PrefacePurpose of This GuideThe purpose of this guide is to help you to understand your independence requirements under the AICPA Code of Professional Conduct and, if applicable, other rule-making and standard-setting bodies. Independence generally implies one's ability to act with integrity and exercise objectivityand professional skepticism. The AICPA and other rule-making bodies have developed rules that establish and interpret independence requirements for the accounting profession. We broadly use the term rules to also mean standards, interpretations, rulings, laws, regulations, opinions, policies, or positions. This guide discusses the independence requirements of the principal rule-making bodies in the United States in plain English so you can understand and apply them with greater confidence and ease. This guide is intentionally concise, so it does not cover all the rules, some of which are complex, nor does it cover every aspect of them. Nonetheless, this guide should help you to identify independence issues that may require further consideration. Therefore, you should always refer to the rules directly, in addition to your firm's policies on independence, for complete information.Conventions and Key Terms UsedThis guide contains answers to frequently asked questions (FAQs) on independence. Here are some of the conventions used:- The word Note in boldface italics emphasizes important points, highlights applicable government regulations, or indicates that a rule change may soon occur. - AICPA Interpretations and rulings to the AICPA Code of Professional Conduct are linked. - Web addresses (universal resource locators or URLs) and hyperlinks to other sources of information are provided. - Information on additional resources appears at the end of this guideto help you resolve your independence issues. (See the question, "Where can I find further assistance with my independence questions?") AICPA Plain English Guide to IndependenceUpdated - January 1, 20045- We