Rule 6.2.1. A CPA or firm of which he is partner, member, or
shareholder shall not express an opinion or issue a review report on financial
statements of a client unless he is and, if applicable, his firm are
independent in fact and appearance with respect to such client. Examples of
such impairment of independence include but are not limited to:
(a) During the period of the professional
engagement or at the time of expressing an opinion or issuing a review report,
he or the CPA firm:
(1)had or was committed
to acquire any direct or material indirect financial interest in the client;
or
(2)had any joint closely held
business investment with the client or any officer, director, partner, or
principal stockholder thereof which was material in relation to the CPA or firm
permit holder's net worth;
(3)had
any loan to or from the client or any officer, director partner, or principal
stockholder thereof. This latter proscription does not apply to the following
loans from a financial institution when made under normal lending procedures,
terms and requirements:
a. loans obtained by
a CPA or the firm which are not material in relation to the net worth of such
borrower;
b. home
mortgages;
c. other secured loans,
except loans guaranteed by a CPA's firm which are otherwise
unsecured;
(4) was a
trustee of any trust or executor or administrator of any estate that had or was
committed to acquire any direct or material indirect financial interest in the
client;
(b) During the
period covered by the financial statements, during the period of the
professional engagement or at the time of expressing an opinion or issuing a
review report, the CPA or the CPA firm:
(1)was connected with the client as a
promoter, underwriter or voting trustee, a director or officer or in any
capacity equivalent to that of a member of management of an employee;
(2)was a trustee of any trust or executor or
administrator of any estate if such trust or estate had a direct or material
indirect financial interest in the client; or was a trustee for any pension or
profit-sharing trust of the client;
(3)had a commitment from the client for a
commission or contingent fee in violation of Rules
6.6. or
6.7.
Rule 6.2.2. In any instance in which a CPA's name and/or CPA
firm's name is associated with financial statements, if he/it is not
independent, such lack of independence shall be disclosed.
Rule 6.2.3. Independence will be presumed to be impaired if
the CPA or firm permit holder performs audit services, other than for
charitable organizations, for a fee that is less than the direct labor cost
reasonably expected at the time the engagement was accepted to be incurred in
performing such services. For this purpose direct labor costs means the total
compensation of the person or persons expected to perform the service for the
time they are expected to serve on the engagement plus all payroll expenses
related to such compensation.
Rule 6.2.4. A CPA or firm permit holder's independence may
be impaired by a close relative's association with a client. Close relatives
are defined as spouses and dependent persons, whether or not related, and
defined as dependent and non-dependent children, grandchildren, stepchildren,
brothers, sisters, parents, grandparents, parents-in-law, and their respective
spouses.
(a) CPA and firm permit
holders must consider whether the strength of personal and business
relationships between the CPA or firm permit holder and the close relative
would lead a reasonable person who is aware of all the facts to conclude that
the situation poses an unacceptable threat to the certificate or registration
holder's objectivity and appearance of independence. In reaching this
conclusion, the CPA or firm permit holder should consider the specific
association with the client.
(b) A
CPA or firm permit holder's independence will be presumed to be impaired with
respect to a client if:
(1)during the period
of the professional engagement or at the time of expressing an opinion, the CPA
or firm permit holder participating in the engagement has knowledge of a close
relative who has a material financial interest in the client;
(2)during the period covered by the financial
statements, during the period of the professional engagement, or at the time of
expressing an opinion:
a. the CPA or firm
permit holder participating in the engagement has a close relative who could
exercise significant influence over the operative, financial, or accounting
policies of the client or is otherwise employed in a position in which the
close relative's activities are normally an element of or subject to
significant internal accounting controls;
b. a proprietor, shareholder, or individual
in a managerial position in a CPA or firm permit holder's office has a close
relative who could exercise significant influence over the client's operating,
financial, or accounting policies, if that proprietor, shareholder or
individual participates in a significant portion of the engagement.
Rule 6.2.5. The examples of impaired independence described
in rules above are not intended to be all-inclusive.
