August 1999

ISB Seeks Comment on Family Relationships Proposal

By Ann E. Spaulding

The Independence Standards Board authorized the release of a proposal to revise rules concerning independent auditors with family members who are employed by clients.

The invitation to comment, Independence and Family Relationships, reflects the view that the greatest threats to independence posed by relationships are those with persons who are directly able to influence the outcome of the audit.

"This proposal would impose the stiffest restrictions on those serving on the engagement team," ISB Chairman William T. Allen said. "If adopted, it would prohibit any employment by the client of a spouse or dependents of an engagement team member. However, it would be less restrictive for partners and others who aren't on the team, based on one tentative view that [lower restrictions on those staff members] would not adversely affect the firm's independence."

Comments are due by September 30.

In other business, the ISB approved, subject to certain changes, a discussion memorandum on practice structures. Evolving Forms of Firm Organization and Structure investigates issues such as the independence implications of corporations buying the nonattest functions of accounting firms. The ISB will issue the final memorandum within the next few weeks and it will have a 60-day comment period.