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    This document discusses professional responsibilities related to independence for CPAs. It outlines specific situations related to loans that would or would not impair independence, such as certain permitted loans from financial institution attest clients. It also discusses how threatened or actual litigation between a CPA and client can impair independence, as well as other parties' financial interests in a CPA's clients. The document provides interpretations for maintaining independence when auditing entities included in governmental financial statements.

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    This document discusses professional responsibilities related to independence for CPAs. It outlines specific situations related to loans that would or would not impair independence, such as certain permitted loans from financial institution attest clients. It also discusses how threatened or actual litigation between a CPA and client can impair independence, as well as other parties' financial interests in a CPA's clients. The document provides interpretations for maintaining independence when auditing entities included in governmental financial statements.

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    This document discusses professional responsibilities related to independence for CPAs. It outlines specific situations related to loans that would or would not impair independence, such as certain permitted loans from financial institution attest clients. It also discusses how threatened or actual litigation between a CPA and client can impair independence, as well as other parties' financial interests in a CPA's clients. The document provides interpretations for maintaining independence when auditing entities included in governmental financial statements.

    Copyright:

    © All Rights Reserved
    Download as RTF, PDF, TXT or read online from Scribd
    Download as rtf, pdf, or txt
    15 views2 pages

    Scan 0009

    Uploaded by

    Zeyad El-sayed
    This document discusses professional responsibilities related to independence for CPAs. It outlines specific situations related to loans that would or would not impair independence, such as certain permitted loans from financial institution attest clients. It also discusses how threatened or actual litigation between a CPA and client can impair independence, as well as other parties' financial interests in a CPA's clients. The document provides interpretations for maintaining independence when auditing entities included in governmental financial statements.

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    MODULE 21 PROFESSIONAL RESPONSIBILITIES 47

    1] Prior to January 1, 1992, under standards then in effect


    2] From a financial institution for which independence was not required, and the finan-
    cial institution subsequently became an attest client .
    3] Obtained from a financial institution for which independence was not required, and
    the loan was sold to an attest' client or
    4] Obtained by a CPA prior to becoming a member of CP A firm of which the financial
    institution is an attest client
    NOTE: All of the above must be kept current and not renegotiated after the above dates. Also, the collateral
    on other secured loans must equal or exceed the remaining loan balance.
    (b) Other permitted loans from a financial institution attest client
    1] Automobile loans and leases collateralized by automobile

    2] Loans of surrender value under an insurance policy


    3] Borrowings fully collateralized by cash deposits at same financial institution (e.g.,
    "passbook loans")
    4] Aggregate outstanding balances from credit card and overdraft accounts that are
    reduced to $10,000 on a current basis.
    (2) Terminology
    (a) Loan-Financial transactions that generally provide for repayment terms and a rate of in-
    terest
    (b) Financial institution-An entity that makes loans to the general public as part of its nor-
    mal business operations
    (c) Normal lending procedures, terms, and requirements-Comparable to those received by
    other borrowers during period, when considering .
    1] Amount of loan and collateral
    2] Repayment terms
    3] Interest rate, including "points"
    4] Closing costs
    5] General availability of such loans to public
    Interpretation 101-6. Effect of threatened litigation
    (1) Client-CPA actual or threatened litigation
    (a) Commenced by present management alleging audit deficiencies, impairs
    (b) Commenced by auditor. against present management for fraud, deceit impairs
    (c) Expressed intention by present management alleging deficiencies in audit work impairs if
    auditor believes strong possibility of claim
    (d) Immaterial not related to audit usually does not impair (i.e., billing disputes)
    (2) Litigation by client security holders or other third parties generally does not impair unless ma-
    terial client-CPA cross-claims develop.
    (3) If independence is impaired, CPA should disassociate and/or disclaim an opinion for lack of
    independence.
    Interpretation 101-7. (Deleted)
    Interpretation 101-8. A CPA's financial interests in nonclients may impair independence when
    those nonclients have financial interests in the CPA's clients.
    Interpretation 101-9. (Deleted)
    Interpretation 101-10. Describes members' duties for independence when auditing entities in-
    cluded in governmental financial statements .
    (1) Generally, auditor of a material fund type, fund account group, or component unit of entity.
    that should be disclosed in notes of general-purpose financial statements, but is not auditing
    primary government, should be independent with respect to those financial statements and
    primary government

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