AUD, Auditing and Attestation

Sources for Ethics, Independence and Professional Responsibilities

Last reviewed 2026-09-14

The standards and authorities behind PocketCPA's AUD lessons on Ethics, Independence and Professional Responsibilities. The topic rests on AICPA Code.

About this topic

An audit opinion is worth something only because the person who signed it had nothing to gain from the answer. Every rule that follows protects that one idea.

The question this Topic answers. When may a firm take on an attest engagement, and what relationships, services and fees put that in doubt?

Key points

Independence requires both independence in fact (state of mind) and independence in appearance (reasonable observer).
The AICPA Code, SEC rules, and PCAOB rules each define independence with overlapping but distinct requirements.
A covered member with a direct financial interest in an attest client impairs independence regardless of materiality.
Objectivity and integrity are required of all CPAs; independence is required only for attest engagements.

What the lessons cover

The conceptual framework
Independence in fact and appearance
Scope and other rule makers
Financial interests, loans, and family relationships
Nonattest services and the management-participation line
Contingent fees and commissions
Issuer independence: Regulation S-X and the PCAOB
Government audits and the Yellow Book
Client records and acts discreditable

Authoritative references

Where these requirements sit in the literature.

The AICPA Code of Professional Conduct, the rule book for a nonissuer engagement:

The gate on nonattest services. AICPA Code 1.295.040, the General Requirements for Performing Nonattest Services interpretation of the Independence Rule, is the gate every nonattest service must clear. Independence survives only where the member does not assume management responsibilities. The client must agree to oversee the service through an individual with suitable skill, knowledge, and experience, make all management decisions, evaluate the results, and accept responsibility for them.
The flat bar on management responsibilities. ET 1.295.030 is the companion bar on the member performing a management responsibility. It is why 1.295.040 is a gate on permitted services rather than a cure for prohibited ones.
The conceptual framework. AICPA Code 1.210 carries it.
The framework's boundary. ET 1.210.010 confines the framework to threats not otherwise addressed by a specific rule.
The threat categories. AICPA Code 1.200 holds them and their illustrations.
Financial interests. ET 1.240.010 is the rule: a covered member's direct interest impairs regardless of amount, an indirect interest only if material to the covered member.
Mutual funds. ET 1.240.030 is the mutual fund guidance.
Permitted loans. ET 1.260.020 carries the closed list, each entry conditioned on the institution's normal lending procedures, terms and requirements, with grandfathering for loans obtained and fully secured before the institution became a client.
Family employment. ET 1.270 reaches employment of an immediate family member in a key position at the attest client.
Contingent fees. ET 1.510 bars a contingent fee for or from an audit or review client, and bars contingent-fee return preparation for any client. It excludes a fee determined on the findings of a governmental agency.
Commissions. ET 1.520 bars a commission for recommending a product or service to a client for whom the firm performs an audit, review or certain other attest services.
Client records in a fee dispute. AICPA Code 1.400 is the acts discreditable interpretation. Return what the client provided regardless of a fee dispute, and withhold the member's own work product only where it is both absent from the client's books and not needed for a filing obligation.

The auditing standards themselves:

The nonissuer audit standard. AU-C 200 frames independence as both independence of mind and independence in appearance, holds that a lack of independence generally precludes issuing an audit opinion, and routes a governmental audit to the GAO's independence standards.
The government standard. Government Auditing Standards (2018 Yellow Book) treats preparing the audited entity's financial statements, from its records or from a client-provided trial balance, as a significant threat requiring safeguards and documentation.

SEC Regulation S-X Rule 2-01, the issuer rule:

The general standard. Rule 2-01(b), framed on a reasonable investor.
Bookkeeping. Rule 2-01(c)(4)(i) prohibits bookkeeping and services related to the accounting records or financial statements.
Management functions. Rule 2-01(c)(4)(vi) prohibits them.
Fees. Rule 2-01(c)(5) bars contingent fees and commissions.
Partner rotation. Rule 2-01(c)(6) carries the five-year lead-partner and Engagement Quality Reviewer limit at (c)(6)(i)(A)(1), the seven-year limit on other audit partners at (c)(6)(i)(A)(2), the two time-outs at (c)(6)(i)(B), and a small-firm exemption at (c)(6)(ii).
Pre-approval. Rule 2-01(c)(7) is audit committee pre-approval.
The period. Rule 2-01(f)(5) defines the audit and professional engagement period.
Who is an audit partner. Rule 2-01(f)(7)(ii) defines the term.
What a contingent fee is. Rule 2-01(f)(10) defines it and carves out fees determined on the findings of governmental agencies.

PCAOB auditing standards, which apply to an issuer audit alongside Rule 2-01:

Independence and the period. AS 1000.04 through .06 require independence in fact and in appearance throughout the audit and professional engagement period, satisfaction of the PCAOB's criteria and every other applicable criterion including the SEC's, and compliance with applicable ethics requirements.
The companion duties. AS 1000.09, .11 and .12 carry due professional care, professional skepticism and professional judgment.
The reviewer's own standing. AS 1220.04 through .08 carry the engagement quality reviewer's competence, independence, integrity and objectivity, including the bar at AS 1220.08 on whoever was engagement partner on either of the two preceding audits.
What the reviewer must read. AS 1220.10d makes the reviewer read the team's independence evaluation.
What blocks approval. The Note to AS 1220.12 makes a firm that is not independent a significant engagement deficiency, blocking concurring approval of issuance.
Where independence is documented. AS 1215.11 permits a central repository referenced from the engagement file.
What must be communicated. AS 1301, Appendix B lists PCAOB Rule 3526, Communication with Audit Committees Concerning Independence.

How PocketCPA uses these sources

Every lesson is written in original words and cites the paragraph each rule comes from. No standard's text is reproduced. How lessons and questions are written and checked is set out in our methodology.