Current through Register Vol. 39, No. 6, September 16, 2024
(a) A CPA, or the
CPA's firm, who is performing an engagement in which the CPA, or the CPA's
firm, will issue a report on financial statements of any client (other than a
report in which lack of independence is disclosed) shall be independent with
respect to the client in fact and appearance.
(b) Independence is impaired if, during the
period of the professional engagement, a covered person:
(1) had or was committed to acquire any
direct or material indirect financial interest in the client;
(2) was a trustee of any trust or executor or
administrator of any estate if such trust or estate had or was committed to
acquire any direct or material indirect financial interest in the client; and
(A) the covered person (individually or with
others) had the authority to make investment decisions for the trust or
estate;
(B) the trust or estate
owned or was committed to acquire more than 10 percent of the client's
outstanding equity securities or other ownership interests; or
(C) the value of the trust's or estate's
holdings in the client exceeded 10 percent of the total assets of the trust or
estate;
(3) had a joint
closely held investment that was material to the covered person; or
(4) except as permitted in the AICPA
Professional Standards Code of Professional Conduct and Bylaws, had any loan to
or from the client or any officer or director of the client, or any individual
owning 10 percent or more of the client's outstanding equity securities or
other ownership interests.
(c) Independence is impaired if during the
period of the professional engagement, a shareholder, a member, a partner or
professional employee of the firm, his or her immediate family and close
relatives, (as defined in the AICPA Code of Professional Conduct and Bylaws) or
any group of such persons acting together owned more than five percent of a
client's outstanding equity securities or other ownership interests.
(d) Independence is impaired if, during the
period covered by the financial statements, or during the period of the
professional engagement, a shareholder, a member, a partner, or professional
employee of the firm was simultaneously associated with the client as a:
(1) director, officer, employee, or in any
capacity equivalent to that of a member of management;
(2) promoter, underwriter, or voting trustee;
or
(3) trustee for any pension or
profit-sharing trust of the client.
(e) For the purposes of this Rule "covered
person" is
(1) an individual on the attest
engagement team;
(2) an individual
in a position to influence the attest engagement;
(3) a partner or manager who provides
non-attest services to the attest client beginning once he or she provides 10
hours of non-attest services to the client within any fiscal year and ending on
the later of the date:
(A) the firm signs the
report on the financial statements for the fiscal year during which those
services were provided; or
(B) he
or she no longer expects to provide 10 or more hours of non-attest services to
the attest client on a recurring basis;
(4) a partner in the office in which the lead
attest engagement partner primarily practices in connection with the attest
engagement;
(5) the firm, including
the firm's employee benefit plans; or
(6) an entity whose operating, financial, or
accounting policies can be controlled (as defined by generally accepted
accounting principles (GAAP) for consolidation purposes) by any of the
individuals or entities described in Subparagraphs (1) through (5) of this
Paragraph or by two or more such individuals or entities if they act
together;
(f) The
impairments of independence listed in this Rule shall not be interpreted to be
an all inclusive list.
Authority
G.S.
55B-12;
57D-2-02;
93-12(9);
Eff. April 1, 1994;
Amended Eff. February 1, 2011; April 1,
2003;
Readopted Eff. February 1,
2016.
