Magazine article The CPA Journal

Independence Standards Board Issues Discussion Memorandum on Evolving Forms of Firm Structure and Organization

Magazine article The CPA Journal

Independence Standards Board Issues Discussion Memorandum on Evolving Forms of Firm Structure and Organization

Article excerpt

The Independence Standards Board (ISB) has been given the difficult task of addressing auditor independence in new firm structures. It has begun the process by issuing a discussion memorandum (DM) that not oily identifies the transactions of the roU-ups and consolidators as concerns but also addresses transactions to monetize the value of a segment of a firm.

These new structures are creating what the DNA calls "related part), relationships" that have the potential to create conflicts of interest and pressures on independence. Tlie ISB will have to decide whether there are quality controls (or safeguards) that can be put in place to ensure a firm's independence Linder these new practice structures or whether there should instead be restrictions on related party relationships with audit clients.

The DM focuses the discussion primarily on 1) the sale of the nonaudit practice to a third party (e.g., in a private placement or initial public offering) with retention by the former partners of the audit practice and some operational link- between the two components and 2) the union of audit firms under a single umbrella (by combining them and selling some or all of the nonaudit portion to a third party or to the public) or via formal associations mid affiliations. …

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