In part 1 of our blog article series on CPA firm independence, we provided the definition and discussed the ethical guidelines Maryland CPAs should follow. In today’s installation, we discuss why independence of your CPA is so important and provide insight into the AICPA Code of Conduct.

Why Independence Matters

When we talk about what it means for your Maryland CPA firm to be independent in their duties and responsibilities to serve your endeavors, does the word INTEGRITY come to mind? It should because adhering to this code of conduct ensures greater integrity and limits financial risks by and between your business or organization and the CPA firm conducting the important task of your accounting services.

Limiting Overall Risks to the Failure of Your Business

When the standards for independence are disregarded, whether at the onset of your agreement to work with a Maryland CPA firm, or anytime going forward, integrity is lost – even if there are no abrupt consequences throughout the engagement.

Take this scenario for example:

You love your accountant who, after years of excellent bookkeeping and financial management services, has more than demonstrated excellence in handling them. So why not have them conduct a required audit? You trust them, right? But not so fast. As the code points out, having your accountant also conduct your audit creates significant risk to their objectivity & integrity of their regular work. Of course, the same is true on your end in terms of keeping your financial matters in accordance with proper engagement of regular business practices.

Integrity of Your Reputation of Sound Business Practice

There are enough risks to consider in running a business as it is. To overlook conflicts of interests or to allow your Maryland CPA firm to disregard their obligations to objectivity and independence could negatively impact your financial operations. This could potentially cause your business to fail and/or contribute to a costly litigation. It may take years of costly correction to turn around, if at all possible. It is just not worth it.

So have the discussion and regularly evaluate your Maryland CPA firm to ensure they are adhering to the guidelines of independence within both your industry and federal/state/local guidelines.

Code of Conduct Highlights for Objectivity and Independence

Objectivity and Independence Principle

“A member should… be free of conflicts of interest in discharging professional responsibilities,”

The AICPA Code of Conduct states that CPAs should be independent in fact (of mind) and appearance when providing “auditing” – accurate affirmations of findings from GAAP or IFRS engagements; or attestation services – prudence in engagements such financial forecasting & legal / regulatory compliance.

The section further expounds on the Objectivity Rule from the AICPA’s Professional Standards by stating that CPAs are obliged to be impartial, intellectually honest, and free of conflicts of interest that may impair a member’s objectivity in attestation services.

Services your CPA firm should not perform in order to maintain integrity, in accordance with the AICPA’s Code of Conduct:

For a full list, access the Code of Conduct here.

Evaluating and Maintaining Objectivity & Independence

The AICPA’s Code of Conduct explains that CPAs serving multiple interests “should protect the integrity of their work, maintain objectivity, and avoid any subordination of their judgment.”

To maintain objectivity and independence, an ongoing assessment of client relationships and public responsibility is required.

Not sure what to ask to assess a CPA’s Objectivity & Independence. Start here:

To discover and review whether or not your Maryland CPA firm is applying standards of independence, click on the following links:

• Is Your Maryland CPA Firm Independent? – Part I – April 2015
• AICPA Plain English Guide to Independence – AICPA, March 2015