MIPPS Independence Rules

Question 1

MIPPS shall be independent when performing attest services?

Answer 1

True

Question 2

If the Code of Conduct doesn’t resolve independence issues, what is your next steps?

Answer 2

Go to the Conceptual Framework (threats and safeguard framework, reduce to an acceptable level)

Question 3

What are the seven threats and safeguards to independence?

Answer 3

1) Adverse Interest- When you and your clients having opposing view, or the client sues you.
2) Advocacy threat- Auditors are gate keepers, you cannot advocate for them.
3) Familiarity threats- Member of your family now works for a attest client, someone you used to work with
4) Management participating- cannot participate in the management of the client.
5) Self-Interest Threat- you have financial interest in a attest client, it would be in your best interest to make their F/S look better.
6) Self-review threat- You did work as a bookkeeper and audit your own work
7) Undue Influence- Client threatens to sue you

Question 4

Safeguards can be applied to mitigate independence issues, what are the three areas of safeguards?

Answer 4

1) Rules from the Profession, legislation, or regulation
2) Rules from The attest Client
3) Rules from the Firm

Question 5

Threats to independence are contracted into four areas, what are those areas?

Answer 5

1) Financial relationships- Owning stock in the attest clients business
2) Employment relationship- Management relationships with the client
3) Family relationships
4) Consulting relationships- attest client should not provide internal audit services to an attest client

Question 6

When should the independence rules be followed? (what time periods)

Answer 6

1) The period covered by the financial statements

2) The period of the professional engagement

Question 7

Covered members who must comply with the independence rules for financial interest include:

Answer 7

1) An individual on the attest team
2) Individual in a position to influence attest engagement
3) A partner, equivalents, who provide 10 hours or more of non attest services to the attest client within any fiscal year (any individual who works on attest clients job)
4) A partner or partner equivalent in the office in which the lead engagement partner or partner equivalent practices in connection with the attest engagement
5) The firm, including the firm’s employee benefit plan
6) An entity who is operating, financial, or accounting policies can be controlled by the first five above