Figure 2: Independence Considerations for Preparing Accounting Records and Financial Statements

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  1. Is the nonaudit service preparing financial statements in their entirety from a client-provided trial balance or underlying accounting records?
    1. No - Evaluate threat for significance. Is threat significant?
      1. Yes, proceed to item 2 (Identify and apply safeguard(s))
      2. No, Document evaluation and proceed
  2. Yes, Identify and apply safeguard(s)
  3. Assess effectiveness of safeguard(s). Is threat eliminated or reduced to an acceptable level?
    1. No - Independence Impairment. Do Not Proceed.
  4. Yes - Document nature of threat and any safeguards applied.
  5. Proceed.