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The case of augmenting the augmentation concept?

Ethics

Charles Selcer, CPA, MBA | June/July 2020 Footnote

Editor's note: Updated May 29, 2020

In 2019, the Wantonwan Wonton Producers Association lost their bookkeeper a couple of months before their financial statement audit was to begin. They called their CPA firm, Chlorine & Florine (C&F), who augmented out a staff accountant to help. The audit went well. In 2020, the company wants to do the same routine.

Q. Can C&F maintain their independence if they provide another audit?

A.  Current Professional Ethics Executive Committee (PEEC) thinking is moving in the following direction that, to maintain independence, all of the safeguards below need to be met:
  • The staff augmentation arrangement is being performed due to an unexpected situation that would create a significant hardship for the attest client to make other arrangements.
  • The augmented staff arrangement is not expected to reoccur.
  • The augmented staff arrangement is performed only for a short period of time. There is a rebuttable presumption that a short period of time would not exceed 30 days.
  • The augmented staff performs only activities that would not otherwise be prohibited by the “Nonattest Services” subtopic (ET sec. 1.295) of the “Independence Rule” (ET sec. 1.200.01).
The member is satisfied that client management designates an individual or individuals who possess suitable skill, knowledge and experience, preferably within senior management, to be responsible for:
  • Determining the nature and scope of the activities to be provided by the augmented staff.
  • Supervising and overseeing the activities performed by the augmented staff.
  • Evaluating the adequacy of the activities performed by the augmented staff and findings resulting from the activities.
  • The firm does not use the augmented staff on the attest engagement team.
  • This is just in the discussion stage, but it indicates a change of thinking from their previous exposure draft.