MU BUAD 361 - Study Guide (33 pages)

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Study Guide



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Study Guide

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Pages:
33
School:
Millersville University
Course:
Buad 361 - Intermediate Accounting 1
Intermediate Accounting 1 Documents
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AICPA Plain English Guide to Independence Updated January 1 2004 TABLE OF CONTENTS NOTICE TO READERS PREFACE Purpose of this guide Conventions and key terms used INTRODUCTION For 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 RELATIONSHIPS When 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 RELATIONSHIPS Which 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 ISSUES What 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 2 AICPA Plain English Guide to Independence Updated January 1 2004 Does it matter if a significant proportion of my firm s fees come from a particular client OTHER GUIDANCE What other guidance on independence and related topics exists Where can I find further assistance with my independence questions 3 AICPA Plain English Guide to Independence Updated January 1 2004 Notice to Readers This publication is designed to provide illustrative information with respect to the subject matter 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 or position of the AICPA It is provided with the understanding that the author and publisher are 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 or guarantees 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 resale or commercial exploitation provided AICPA copyright statement and acknowledgment of any modification is displayed in any circumstance of reuse or reprint 4 AICPA Plain English Guide to Independence Updated January 1 2004 Preface Purpose of This Guide The 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 objectivity and 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 Used This 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 guide to help you resolve your independence issues See the question Where can I find further assistance with my independence questions 5 AICPA Plain English Guide to Independence Updated January 1 2004 We describe the rules of the U S Securities and Exchange Commission SEC that is those that apply to audits of public companies in boxed text like this one and provide citations to specific rules Generally we provide these descriptions where the SEC has a rule that differs in some manner or is presented somewhat differently than the corresponding AICPA rule This guide uses the following key terms Client or attest client an entity with respect to which independence is required Firm a form of organization permitted by law or regulation whose characteristics conform to resolutions of AICPA Council that


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