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D20066 1 (2019-03-07)

handle is hein.gao/gaobadvps0001 and id is 1 raw text is: GAOU.S. GOVERNMENT ACCOUNTABILITY OFFICE 441 G St. N.W. Washington, DC 20548 March 7, 2019 Ms. Toni Lee-Andrews Director, Professional Ethics Division American Institute of Certified Public Accountants 1211 Avenue of the Americas New York, NY 10036-8775 GAO's Response to the American Institute of Certified Public Accountants' Professional Ethics Division's December 2018 Proposed Interpretation of the AICPA Code of Professional Conduct, Staff Augmentation Arrangements Dear Ms. Lee-Andrews: This letter provides GAO's comments on the proposed interpretation entitled Staff Augmentation Arrangements, which the American Institute of Certified Public Accountants' (AICPA) Professional Ethics Executive Committee (PEEC) prepared. GAO promulgates generally accepted government auditing standards (GAGAS), which provide professional standards for auditors of government entities in the United States. GAGAS provides a framework for conducting high-quality audits of government awards with competence, integrity, objectivity, and independence. Our comments reflect the importance we place on reinforcing the values promoted in both the AICPA Code of Professional Conduct and GAGAS. We anticipate that auditors of government entities may have to comply with both the interpretation and GAGAS. We support PEEC's efforts to clarify the independence requirements and considerations for situations in which members and members' firms provide human resource capital as a service to clients under staff augmentation arrangements. However, we are concerned that the proposed interpretation may lead members to incorrectly conclude that independence threats are at an acceptable level even when reasonable, informed third parties would perceive the members independence as impaired. For example, if a government auditor was augmented to an audited government entity, and that auditor appeared to be employed by the entity, the public would likely conclude that the auditor was not independent. Accordingly, we believe that members should critically evaluate the threats to independence and safeguards and document the threats and safeguards applied. In addition, we believe that the proposed interpretation could benefit from the following: * Including indicators that members could use to evaluate the skills, knowledge, and experience of the individual designated to oversee the augmented staff member's activities. * Clarifying the threats that exist if a staff augmentation arrangement creates the appearance of prohibited employment with the attest clients; members should consider any threat posed by the appearance of prohibited employment to be a significant threat. * Defining appearance in appearance of prohibited employment. * Adding that advocacy and familiarity threats may exist when a member or member's firm has a staff augmentation arrangement with an attest client, and adding guidance on evaluating the threats and identifying relevant safeguards. PEEC requested responses to the following questions. Our responses follow. Page 1

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