Ethics Independence Professional Skepticism

Ethics — Independence & Professional Skepticism Exam: CPA — Certified Public Accountant Chapter: Chapter 3 — AUD Ethics, Independence, and Engagement Acceptance Standard: AICPA Code of Professional Conduct; AU-C 200 Last Updated: 2026-06-26 --- ## Key Takeaways - Independence is required for attestation and audit engagements — not all CPA services. - The AICPA uses a conceptual framework approach: identify threats, evaluate significance, apply safeguards. - Five categories of threats: self-interest, self-review, advocacy, familiarity, intimidation. - Professional skepticism is a questioning mind and critical assessment of evidence — it is required under GAAS. - Professional skepticism ≠ professional judgment. They are related but distinct concepts. --- ## AICPA Independence — Conceptual Framework Approach The AICPA Code of Professional Conduct does not list every possible independence impairment. Instead, CPAs must apply a conceptual framework (also called the "threats and safeguards" approach): 1. Identify threats to independence (see categories below) 2. Evaluate significance of each threat — could it compromise independence in fact or appearance? 3. Apply safeguards to eliminate or reduce the threat to an acceptable level 4. If no safeguard can reduce the threat to an acceptable level → decline or withdraw from the engagement Two dimensions of independence: - Independence in fact: The CPA is actually unbiased (mental state) - Independence in appearance: A reasonable, informed third party would conclude the CPA is unbiased Both are required. Independence in appearance is evaluated from an objective third-party perspective — not just the CPA's own belief. --- ## Five Threats to Independence | Threat | Description | Example | |---|---|---| | Self-interest | Financial or personal interest that could bias judgment | Owning stock in an audit client | |…