The rules in this Section apply to any CPA who engages in attest services as defined in 21 NCAC 08A .0301(b).
(a) A CPA, or the CPA’s firm, who is performing an engagement in which the CPA, or the CPA’s firm, will issue a report on financial statements of any client (other than a report in which lack of independence is disclosed) shall be independent with respect to the client in fact and appearance.
(b) Independence is impaired if, during the period of the professional engagement, a covered person:
(1) had or was committed to acquire any direct or material indirect financial interest in the client;
(2) was a trustee of any trust or executor or administrator of any estate if such trust or estate had or was committed to acquire any direct or material indirect financial interest in the client; and
(A) the covered person (individually or with others) had the authority to make investment decisions for the trust or estate;
(B) the trust or estate owned or was committed to acquire more than 10 percent of the client’s outstanding equity securities or other ownership interests; or
(C) the value of the trust’s or estate’s holdings in the client exceeded 10 percent of the total assets of the trust or estate;
(3) had a joint closely held investment that was material to the covered person; or
(4) except as permitted in the AICPA Professional Standards Code of Professional Conduct and Bylaws, had any loan to or from the client or any officer or director of the client, or any individual owning 10 percent or more of the client’s outstanding equity securities or other ownership interests.
(c) Independence is impaired if during the period of the professional engagement, a shareholder, a member, a partner or professional employee of the firm, his or her immediate family and close relatives, (as defined in the AICPA Code of Professional Conduct and Bylaws) or any group of such persons acting together owned more than five percent of a client’s outstanding equity securities or other ownership interests.
(d) Independence is impaired if, during the period covered by the financial statements, or during the period of the professional engagement, a shareholder, a member, a partner, or professional employee of the firm was simultaneously associated with the client as a:
(1) director, officer, employee, or in any capacity equivalent to that of a member of management;
(2) promoter, underwriter, or voting trustee; or
(3) trustee for any pension or profit-sharing trust of the client.
(e) For the purposes of this Rule “covered person” is
(1) an individual on the attest engagement team;
(2) an individual in a position to influence the attest engagement;
(3) a partner or manager who provides non-attest services to the attest client beginning once he or she provides 10 hours of non-attest services to the client within any fiscal year and ending on the later of the date:
(A) the firm signs the report on the financial statements for the fiscal year during which those services were provided; or
(B) he or she no longer expects to provide 10 or more hours of non-attest services to the attest client on a recurring basis;
(4) a partner in the office in which the lead attest engagement partner primarily practices in connection with the attest engagement;
(5) the firm, including the firm’s employee benefit plans; or
(6) an entity whose operating, financial, or accounting policies can be controlled (as defined by generally accepted accounting principles (GAAP) for consolidation purposes) by any of the individuals or entities described in Subparagraphs (1) through (5) of this Paragraph or by two or more such individuals or entities if they act together;
(f) The impairments of independence listed in this Rule shall not be interpreted to be an all inclusive list.
(a) Standards for Auditing Services. A CPA shall not render auditing services unless the CPA has complied with the applicable generally accepted auditing standards.
(b) Statements on Auditing Standards. The Statements on Auditing Standards issued by the AICPA are incorporated by reference, including subsequent amendments and editions, and shall be considered generally accepted auditing standards for the purposes of Paragraph (a) of this Rule. This document may be accessed at https://us.aicpa.org/research/standards/auditattest/clarifiedsas.html at no cost.
(a) Standards for Accounting and Review Services. A CPA shall not render accounting and review services unless the CPA has complied with the standards for accounting and review services.
(b) Statements on Standards for Accounting and Review Services. The Statements on Standards for Accounting and Review Services issued by the AICPA are incorporated by reference, including subsequent amendments and editions, and shall be considered as the standards for accounting and review services for the purposes of Paragraph (a) of this Rule. This document may be accessed at https://us.aicpa.org/research/standards/compilationreview.html at no cost.
(a) Standards for Governmental Accounting. A CPA shall not permit the CPA’s name to be associated with governmental financial statements for a client unless the CPA has complied with the standards for governmental accounting.
(b) Statements on Governmental Accounting and Financial Reporting Services. The Statements on Governmental Accounting and Financial Reporting Services issued by the GASB are incorporated by reference, including subsequent amendments and editions, and shall be considered as the standards for governmental accounting for the purposes of Paragraph (a) of this Rule. This document may be accessed at https://www.gasb.org/standards at no cost.
(a) Standards for Attestation Services. A CPA shall not render attestation services unless the CPA has complied with the applicable attestation standards.
(b) Statements on Standards for Attestation Engagements. The Statements on Standards for Attestation Engagements issued by the AICPA are incorporated by reference, including subsequent amendments and editions, and shall be considered attestation standards for the purposes of Paragraph (a) of this Rule. This document may be accessed at https://us.aicpa.org/research/standards/auditattest/ssae at no cost.
A CPA who is engaged to perform a peer review shall not violate the rules or standards as set in 21 NCAC 08M of the peer review program under which the review is made or the engagement contract connected with that peer review.
(a) Standards for Government Audits. A CPA shall not render audit services to a government entity or entity that receives government awards and is required to receive an audit in accordance with Government Auditing Standards unless the CPA has complied with the applicable Generally Accepted Government Auditing Standards.
(b) Government Auditing Standards. The Government Auditing Standards issued by the United States Government Accountability Office are incorporated by reference, including subsequent amendments and editions, and shall be considered Generally Accepted Government Auditing Standards for the purpose of Paragraph (a) of this Rule. This document may be accessed at https://www.gao.gov/yellowbook at no cost.
(a) International Standards on Auditing. A CPA shall not render auditing services that report to comply with international standards unless the CPA has complied with the applicable international standards on auditing.
(b) Statement on International Standards on Auditing. The Statement on International Standards on Auditing issued by the International Auditing and Assurance Standards Board are incorporated by reference, including subsequent amendments and editions, and shall be considered International Standards on Auditing for the purpose of Paragraph (a) of this Rule. This document may be accessed at https://www.iaasb.org/standards-pronouncements at no cost.
A CPA rendering audit services to a state or local government entity, non-profit organization, or other entity that is subject to the Single Audit Act of 1984, P.L. 98-502, and the Single Audit Act Amendments of 1996, P.L. 104-156, must comply with the Single Audit Act amendments as implemented through Subpart F – Audit Requirements of Title 2 of C.F.R., Chapter II, Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR part 200).
(a) Statement on Standards for Forensic Services. A CPA shall not render forensic services unless the CPA has complied with the Statement on Standards for Forensic Services.
(b) Statement on Standards for Forensic Services. The Statement for Forensic Services, including the definition of such services, issued by the AICPA are incorporated by reference, including subsequent amendments and editions. This document may be accessed at https://www.aicpa.org/resources/download/statement-on-standards-for-forensic-services at no cost.
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