AICPA offers guidance on payroll audits and familiarity threats

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The American Institute of CPAs has released a set of questions and answers on the topic of payroll compliance for multiemployer plans, along with some new Q&As about familiarity threats for senior personnel who have been on an engagement team for a long period of time.

On the matter of payroll audits, the AICPA issued Technical Questions and Answers (TQA) 6935.03–.06. The document offers nonauthoritative guidance pertaining to employee benefit plan payroll compliance services (payroll audits) for multiple employers, in accordance with AT-C section 215, Agreed-Upon Procedures Engagements (AICPA, Professional Standards).

The guidance talks about requesting and obtaining an engagement letter along with a representation letter from the engaging party. It also elaborates on situations in which the requested representations are not received from one or more of the responsible parties, and the use of agreed-upon procedures reports or other reports as evidence in an audit.

On the matter of familiarity threats, the AICPA’s Professional Ethics Division recently added new Q&As to the end of an earlier FAQ document from, according to the Journal of Accountancy. It notes that the familiarity threat to independence can increase when senior personnel serve on an attest engagement team for a long period of time, and senior personnel will need to determine the significance of the threats and the relevant factors for evaluating the threat to independence they might pose.

The guidance provides some of the factors to consider, including the overall length of individuals’ relationship with an attest client, whether the relationship existed while they worked for a previous firm, as well as how long they have been on the team and the nature of the roles they have performed. Other considerations include the extent to which the person’s work is directed, reviewed and supervised by other senior personnel, and the extent to which, due to their own seniority, they have the ability to influence the outcome of the attest engagement.

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