The American Institute of CPAs’ professional ethics division has issued a proposal that would outline the independence requirements of CPA firm networks and associations.
The proposal extends the independence requirements imposed on network firms to any firm or entity that a network firm either controls, is controlled by, or with which it is under common control. Under the proposal, network firms would be independent of all the other network firms’ audit and review clients for which a general use audit or review report is issued.
For all other attest clients, a network firm would need to consider any threats that the firm knows or has reason to believe might be created by other network firms’ interests in and relationships with clients. If those threats are not at an acceptable level, the AICPA proposes, the firm needs to apply safeguards to eliminate the threats or reduce them to an acceptable level.
If only a subset of firms within an association share one or more characteristics of a network firm, such as a common brand name, only that subset of firms, rather than the entire association, would be considered a network for the purposes of the proposed interpretation.
