Professional Ethics Division: Plain English guide to independence
Purpose of this guide
The purpose of the AICPA Plain English guide to
independence is to help you understand independence
requirements under the AICPA Code of Professional
Conduct (the code) and, if applicable, other rulemaking
and standard-setting bodies. Independence generally
implies one’s ability to act with integrity and exercise
objectivity and professional skepticism. The AICPA
and other rulemaking bodies have developed rules that
establish and interpret independence requirements
for the accounting profession. We use the term ʺrulesʺ
broadly to mean rules, standards, interpretations,
laws, regulations, opinions, policies or positions. This
guide discusses in plain English the independence
requirements of the principal rulemaking bodies in
the United States so you can understand and apply
them with greater condence and ease. The AICPA
rules require a member to comply with more restrictive
independence provisions, if applicable, of certain
regulators, such as state boards of accountancy and
the SEC, the Government Accountability Ofce, and the
Department of Labor.
This guide is intentionally concise; it does not cover all
the rules (some of which are complex), nor does it cover
every aspect of the rules. Nonetheless, this guide should
help you identify independence issues that may require
further consideration. For complete information, you
should always refer directly to the rules, in addition to
your rm’s policies on independence.
Conventions and key terms
This guide uses the following conventions to enhance
your reading:
• The word “Note” in boldface italics emphasizes
important points, highlights applicable government
regulations, or indicates that a rule change may soon
occur.
• The AICPA interpretations to the code are linked the
rst time they appear in a chapter.
• Terms that are dened in the code appear in italics. The
rst time a dened term appears in a chapter, it will also
be linked.
• Internet addresses (URLs) and hyperlinks to other
sources of information are provided.
• Information on additional resources appears at the
end of this guide to help you resolve your independence
issues. (See the section “Where can I nd further
assistance with my independence questions?” in
chapter 11 of this guide.)
Preface
We describe the rules of the SEC and the PCAOB — that
is, those that apply to audits of SEC registrants, issuers,
and broker-dealers — in boxed text (like this one) and
provide citations to specic rules. Generally, we provide
these descriptions when the SEC and the PCAOB
impose either additional requirements or their rules
otherwise differ from the AICPA rules.
For purposes of this guide, an SEC registrant is an
issuer ling an initial public offering, a registrant ling
periodic reports under the securities laws, a sponsor
or manager of an investment fund, or a foreign private
issuer that is (or is in the process of becoming) an SEC
registrant. In this guide, SEC audit client means an SEC
registrant and its afliates, as dened in the SEC rules.
For purposes of this guide, an issuer is an entity ling an
initial public offering, a registrant ling periodic reports
under the securities laws, a sponsor or manager of an
investment fund, or a foreign private issuer that is (or is
in the process of becoming) an SEC registrant. In this
guide, SEC audit client means an SEC registrant and its
afliates, as dened in the SEC rules.
For the purposes of this guide, a broker-dealer is an
entity that is dened in Sections 3(a)(4) and 3(a)(5) of
the Exchange Act and is required to le a balance sheet,
income statement, or nancial statement under Section
17(e) (1)(A) of the Exchange Act and where these
statements are required to be certied by a registered
public accounting rm.
Note: The auditors of all registered broker-dealers
and certain other entities must be registered with the
PCAOB and these auditors need to apply the SEC and
PCAOB independence rules.