Threats
The threat that, due to a long or close relationship with a client, a member will become too sympathetic to the client’s interests or too accepting of the client’s work or product.
Familiarity Threat
Would independence be considered to be impaired if a member belongs to the same social club as a client (for example, country club, tennis club)?
No, because it is a social matter
Maintain an appropriate level of professional leadership and expertise by enhancing knowledge and skills.
Competence Standard
A member in public practice should observe the Principles of the Code of Professional Conduct in determining the scope and nature of services to be provided.
Scope and Nature Principle
The threat that a member could benefit, financially or otherwise, from an interest in, or relationship with, a client or persons associated with the client.
Self-Interest Threat
Would independence be considered to be impaired if a member accepts a gift or other unusual consideration from a client?
Yes, if it is more than a small gift
Inform all relevant parties regarding the appropriate use of confidential information. Monitor to ensure compliance.
Confidentiality Standard
A member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities. A member in public practice should be independent in fact and appearance when providing auditing and other attestation services.
Objectivity and Independence Principle
An accounting manager is pressured to hire an unqualified individual.
Undue Influence Threat
Would independence be considered to be impaired if a member held a significant amount of stock in a client?
Yes, because they have a financial interest in the client
Mitigate actual conflicts of interest. Regularly communicate with business associates to avoid apparent conflicts of interest. Advise all parties of any potential conflicts of interest.
Integrity Standard
A member should observe the profession’s technical and ethical standards, strive continually to improve competence and the quality of services, and discharge professional responsibility to the best of the member’s ability.
Due Care Principle
A partner in an audit engagement was associated with the client as an employee, an officer, a director, or a contractor.
Self-Review threat
Would independence be considered to be impaired if a member also served on the board of directors of an attest client's company?
Yes, because they have a significant position in the company.
Abstain from engaging in or supporting any activity that might discredit the profession.
Integrity Standard
In carrying out their responsibilities as professionals, members should exercise sensitive professional and moral judgments in all their activities.
Responsibilities Principle
A member or the member’s immediate family or close relative has a financial or another relationship with a vendor, customer, competitor, or potential acquisition of the employing organization.
Adverse Interest Threat
A member provides advisory services for a client. In that connection, the member attends board meetings and interprets financial statements. Would independence be considered to be impaired under these circumstances?
No, because the member is in an advisory role
Provide all relevant information that could reasonably be expected to influence an intended user’s understanding of the reports, analyses, or recommendations.
Credibility Standard
To maintain and broaden public confidence, members should perform all professional responsibilities with the highest sense of integrity.
Integrity Principle