What Classifies As An Impaired Audit Member ( Aicpa )

2797 Words12 Pages
1. The point in which an auditor violates the independence rules and guidelines would primarily be conflicts of interests and can be broken down to smaller issues like financial involvement and family members. Any conflict of interest should question the auditor’s independence and the conflict should be reviewed to insure continued independence. In reviewing the code of conducts for the Big 4, three of the companies explicitly cover conflicts of interest and the third has a portion of their website covering the issue. If a member of the audit team has a conflict of interest it should be brought up, and if the firm is too small hiring a contractor to serve as the audit partner might be allow some degree of arms length. The AICPA has a…show more content…
Some examples of a loss of independence would be if an auditor was on an audit team in which they owned stock in, if a family member was working for the client, interactions between an auditor and client including families outside of businesses, and even an auditor dating an employee of a client. A real example would be in January 2014, KPMG provided non-audit relating services to affiliates of an audit client during an actual audit, in addition some KPMG personal owned stock of the audit client (US Securities and Exchange Commission, 2014).

2. Based on the events presented, it does question the independence of the auditor. Having Bergman recommend Tsai for the CAO position to the board of directors, shows that Bergman is familiar with Tsai, enough to put his reputation on the line. That alone plants the seed of if auditor independence was an issue, but a week later when BDO Seidman presents its audit report things start to support the idea of auditor independence was broken. Something not covered in the case was if Tsai knew about the job recommendation during the process of the audit and also the reasoning being Bergman’s recommendation such as having another hiring another audit member to help cover issues up. The last part of that issue when the job offer was offered, if the job was offered before or during the audit, that would compromise independence since Tsai objectivity would be compromised.
The PCAOB has listed three threats to auditor
Open Document