TOP AUDITING ISSUES FOR 2013 - CCH

MODULE 1 — CHAPTER 1 — The Conceptual Framework Approach to Independence 11
Preparing accounting records and financial statements. Some services
involving preparation of accounting records always impair independence.
These include:
Determining or changing journal entries, account codes, or classifications
or other accounting records without management approval
Authorizing or approving the entity’s transactions
Preparing or making changes to source documents, such as the general
ledger, purchase orders, payroll time records, and customer orders or
contracts, without management approval
Accepting responsibility for the preparation and fair presentation of
financial statements that the auditor will subsequently audit
Other services related to accounting records may be allowable if they are not
expressly prohibited, the requirements in the section captioned Requirements
for Performing Nonaudit Services above are met, and significant threats to
independence have been eliminated or reduced to an acceptable level by
applying the safeguards. These include:
Recording transactions for which management has determined or
approved appropriate account classifications
Posting coded transactions to the general ledger
Preparing financial statements based on the trial balance
Posting entries that have been approved by management to the entity’s
trial balance
Preparing account reconciliations that identify reconciling items for
management’s evaluation
Proposing standard, adjusting, or correcting journal entries or other
changes affecting the financial statements provided that:
Management reviews and accepts the changes.
The auditor is satisfied that management understands their nature
and impact.
Internal audit assistance by external auditors. Assisting an entity in
performing its internal audit activities always impairs independence when
the external auditor:
Sets internal audit policies or strategic direction
Performs procedures that are a part of internal control, such as reviewing
and approving changes to employee data access privileges
Determines the scope of internal auditing.
Internal control monitoring. Performing or supervising ongoing monitoring
procedures on behalf of management impairs the auditor’s independence.