Contents:

Introduction
Reporting
Recognition of Impairment
Noncompliance with Firm Policy
Failure to Consider Independence

Peer Review Guide > Sample Recommendations for Strengthening Quality

Peer Review Guide > Sample Recommendations for Strengthening Quality

Introduction:

The section shows you how you could revise your policies or procedures to strengthen areas related to independence. Other alternatives may also exist.

Collectively, independence policies or procedures provide assure that individuals will recognize instances where the firm lacks independence. These policies should guide the firm in reporting lack of independence, if appropriate, for compilation engagements. (A firm may not issue an audit or review report when the firm lacks independence with respect to a client.) Policies may be informal (i.e. not written, but generally understood) or formal (as written in a quality control document.)

Reporting:

1. Remind all firm members that independence is required for all audits and reviews
2. Expand the engagement partner review to specifically consider independence.
3. Add questions to engagement work programs concerning evaluation of independence.
4. Use reporting checklists.
5. Determine that all fees that are over a year old have been paid.

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Recognition of Impairment

1. Inform staff about firm's independence requirements through periodic staff meetings.
2. Provide examples of impaired independence situations to staff.
3. Assign a person with the responsibility to resolve independence issues.
4. Require staff and owners to complete independence questionnaires annually.

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Noncompliance with Firm Policy

1. Assign someone responsibility for monitoring the completion of independence questionnaires.
2. Develop guidelines for documenting independence consultations.
3. Remind members of the firm that professional standards require independence in fact as well as independence in appearance.

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Failure to Consider Independence:

1. Inform staff where to locate ethics interpretations.
2. Call the AICPA or state society's ethics hotline when you have questions.
3. Add a work program step to determine that the prior year's engagement fees have been paid.
4. Review the firm's accounts receivable listing, on a regular basis, for past due amounts. Identify any attest engagements with past due fees that are over one year old.
5. Review the AICPA ethics questions and answers as a reminder of circumstances that can impair independence.

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© 1998-2001, Duane Reyhl, CPA
E-mail: dreyhl@reyhl.com

Updated: October 26, 2003