The American Institute of CPAs has published a report on the reliability and independence of CPAs, as seen from the perspective of commercial bankers.
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The study, commissioned by the American Institute of CPAs Private Companies Practice Section, is part of an overall reliability initiative that has led to proposed new standards that will make it significantly easier for CPAs to provide needed services to private-company clients.
The independence standards have always restricted CPAs from providing certain non-attest services to attest clients, said PCPS Executive Committee chair David Morgan in a letter accompanying the report. The standards were clarified over the last few years. Many believe the clarification placed greater restrictions on CPAs who provide services for an attest client. That raised a critical question: Is independence always the most important concern when working with closely held companies that have relatively few financial statement users beyond the business owners themselves and their local bankers? Or is the reliability of the financial statements a more pressing issue for those users?
The report, from professors F. Todd DeZoort of the University of Alabama and Mark Taylor of Creighton University, analyzed the perceptions of 408 commercial lending officers of CPAs integrity, expertise, independence, objectivity and reliability in a hypothetical lending scenario.
The results indicated that expertise and objectivity directly affect perceptions of CPA and financial reporting reliability, but independence does not. The participants did not perceive any decrease in reliability when CPAs violate existing independence rules by combining attest and non-attest services in review and compilation engagements to improve the quality of the financial statements, said the report.