February 2001

Actions Permitted When Independence Is Impaired

Q. If a member was independent when his or her report was initially issued, may the member re-sign the report or consent to its use at a later date when his or her independence is impaired?

A. Yes. A member may re-sign the report or consent to its use at a later date when his or her independence is impaired, provided that no “post-audit work” is performed by the member during the period of impairment. In this context, the term “post-audit work” does not include inquiries of successor auditors, reading of subsequent financial statements, or such procedures as may be necessary to assess the effect of subsequently discovered facts on the financial statements covered by the member’s previously issued report.

Client Advocacy and Expert Witness Services

Q. Would the performance of expert witness services be considered acting as an advocate for a client as discussed in Interpretation 102-6, Professional Services Involving Client Advocacy?

A. No. A member serving as an expert witness does not serve as an advocate but as someone who should reach and present positions objectively, with specialized knowledge, training, and experience in a particular area.

Audits, Reviews, or Compilations and a Lack of Independence

Q. If a member in public practice is not independent with respect to a client, is it permissible under Rule 101 for the member to issue an audit, review, or compilation report for the client?

A. A member may not issue an audit opinion or review report if the member is not independent with respect to the client. A member may issue a compilation report even if the member is not independent with respect to the client; however, the member specifically must disclose his or her lack of independence without giving reasons for the impairment.

Code of Professional Conduct and Accountancy Regulations

Q. Where can I get a copy of the NYSSCPA’s Code of Professional Conduct and the Rules of the Board of Regents of New York State?

A. Go to the Society’s website at www.nysscpa.org, click on Professional Resources (located in the middle column), then click on Code of Conduct or Accountancy Regulations. You can find the American Institute of CPAs Code of Professional Conduct on its website at www.aicpa.org.

Individual Considering or Accepting Employment with the Client

Q. During the performance of an engagement, an individual participating in the engagement may be offered employment by the client or may seek employment with the client. What are the implications of these actions?

A. An individual who is participating in an engagement and is offered employment by, or seeks employment with, the client during the conduct of the engagement must consider whether his or her ability to act with integrity and objectivity has been impaired. When the engagement requires independence, the individual must remove himself or herself from the engagement until the employment offer is rejected or employment is no longer being sought, in order to prevent any appearance that integrity or objectivity has been impaired.

A member may become aware that an individual participated in an engagement while employment with the client was being considered or already had been accepted. In these circumstances, the member should consider what, if any, additional procedures may be necessary to ensure that all of the individual’s work was performed with objectivity and integrity as required under Rule 102. Any additional procedures will depend on the nature of the engagement and may require re-performance of the work or other appropriate procedures.