Last week, the AICPA held its annual conference in Washington DC on SEC and PCAOB Developments. Among the many accounting and auditing topics discussed was -- of course -- independence. The follow highlights some discussions on independence that took place during the conference:
- Though the number of consultations on independence between auditors and the Office of the Chief Accountant (OCA) are down, those consultations can be complex, e.g., matters involving the use of innovative technology tools or defining affiliates within a mutual fund or private equity structure. The staff uses the consultations to determine whether auditors need particular guidance.
- Marc Panucci, OCA Deputy Chief Accountant, said the staff has also been consulted on the loan provision rule (which was the subject of extended temporary relief by the Division of Investment Management), while the SEC staff works toward making a recommendation to the Commission. Firms also consult the staff when their clients are preparing for an Initial Public Offering, as continuation as auditor requires them to comply with SEC independence rules for periods audited while the client was private.
- Mr Panucci suggested certain best practices for complying with independence standards, which included working with the client's management to help them understand their responsibilities related to SEC and PCAOB rules compliance. He also stressed the importance of planning when audit firm rotation or recasted financial statements require a former auditor to be independent.
- Mr Panucci cautioned firms on applying the general standard in its independence rules, which requires auditors to consider principles, and to ensure the client's management and the firm has policies and procedures in place to avoid scope creep, particularly as auditors may be providing clients feedback on controls and other matters as management implements new accounting standards.
