A CPA’s independence can be impaired by performing nonattest services.
Cause of Independence Impairment
The AICPA Code of Conduct requires that clients accept responsibility for nonattest services if attest services are also provided. Why? If the client has no one to assume responsibility (for the nonattest work), then the auditor could be performing management responsibilities that impair independence.
What are some examples of nonattest services?
- Tax return preparation
- Maintaining a client’s depreciation schedule
- Preparing a client’s financial statements
- Bookeeping services
- Providing hosting services to a client
Documentation of SKE
The client should appoint someone with appropriate skill, knowledge, and experience (sometimes referred to as SKE) to oversee nonattest services provided by the public accounting firm. The CPA firm should document their consideration of independence — usually in the enagagement letter and/or a memorandum. Document the nonattest services to be provided and the client personnel overseeing the work. It is helpful to also document the skill, knowledge, and experience of the designated person. What is their educational background? How long have they served in their role? Do they have any certifications (e.g., CPA, CISA)? What qualifies the designated (client) person to oversee the nonattest service performed by the attest firm?
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