ACCOUNTING & AUDITING
AICPA ISSUES EXPOSURE DRAFT ADDRESSING STAFF AUGMENTATION ARRANGEMENTS By Don Carpenter, MSAcc/CPA
T
he Professional Ethics Executive Committee of the American Institute of CPAs (AICPA) re-issued an exposure draft for comment titled Staff Augmentation Arrangement in September 2020 that updates a draft originally released in December 2018. Staff augmentation is commonly referred to as loan staff arrangements. Such arrangements are not uncommon in today’s environment of lean staffing and are certainly not limited to accounting and tax functions. The reliance on contract (non-employee) services occurs most commonly in
accounting or tax functions when non-routine projects such as the implementation of new accounting pronouncements require additional manpower to gather and analyze information. The need for specific expertise such as during impairment testing or acquisition accounting might also require supplemental temporary staff. To address these gaps in staffing, it is not unusual for companies to turn to their audit firm given the long-term relationship and the efficiencies that naturally result from familiarity with permanent staff and existing systems.
However, use of attest firm personnel raises significant issues with regard to auditor independence. Without these safeguards, the attest firm could find itself effectively auditing the work of its own staff. To avoid this obvious conflict, the exposure draft delineates a list of safeguards that must be observed to preserve auditor independence. Please see Figure 1 for a list of the safeguards. In addition, the services performed cannot include any activities prohibited by the Independence Rule (ET sec. 1.200.001). Specific areas are highlighted in the guidance that closely follow the non-audit services
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