A recently released exposure draft from the American Institute of CPAs contains two different interpretations under the institute's independence rules.

Released by the Professional Ethics Executive Committee, the exposure draft proposes one new and one revised interpretation under Rule 101, "Independence." The changes take into account comments received on the committee's original draft, released a year ago. That draft contained guidance for independence and the use of indemnification and limitation of liability provisions as well as the performance of forensic accounting services.

The committee's first proposal would provide guidance to members on the impact that certain indemnification and limitation of liability provisions may have on a member's independence when included in engagement letters, or other agreements entered into with a client. However the proposal does say that sufficient independence can be mitigated depending on the provisions surrounding the engagement.

The second proposal would revise Ethics Interpretation 101-3, "Performance of Nonattest Services," to incorporate guidance on how the provision of forensic accounting services and tax compliance services would affect a member's independence. Under the proposal, forensic accounting services are defined and guidance is given on providing witness testimony.

Comments on the draft will be accepted through Nov. 8. The full exposure draft can be viewed at www.aicpa.org/download/ethics/Final_ED_September_2006.pdf

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