Auditor Independence and IT Services

By Jeffrey A. Ford, Grossman Yanak & Ford LLP

New audit independence guidance becomes effective in January 2022 in the US for audit firms that provide technology services. The following are only a few of the key issues related to this guidance.

Hosting and Client Portals

Where the client data resides is a key consideration. Hosting services include keeping an attest client’s depreciation records, historical tax returns, etc. In short, the auditor may not serve as the client’s record storage or disaster recovery provider. To maintain independence, complete records must be provided to and maintained by the client. Further, the client’s access to the data in the auditor’s possession must be terminated after a reasonable period.

Commercial Off-The-Shelf Software (COTS)

An auditor may assist with COTS implementation by providing training, advice, and other types of services. Creating new code or other steps that alter COTS functionality, writing a custom interface to a COTS, or custom data translation would impair independence. Use of third-party applications for interfaces and data translation allows the possibility of remaining independent.

Other Data Analysis Tools

Dashboards and data analysis applications should be analysed to determine if they are a financial information system (FIS) or merely a tool. Designing, developing, or utilising a FIS on behalf of a client impairs independence; design, development, or use of a tool does not. A tool performs only discrete calculations. A FIS aggregates or generates data that is significant to the financial statements or financial processes.

Keeping Independent

It is critical to avoid performing any management functions. The auditor should assure that the client (1) has the appropriate skills, knowledge and experience, (2) evaluates and accepts responsibility for any inputs and assumptions, and (3) has suffcient information to understand the processes and results.


Jeffrey A. Ford

name

GGI member firm
Grossman Yanak & Ford LLP
Advisory, Auditing & Accounting, Tax
Pittsburgh (PA), USA
T: +1 412 338 93 02
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Grossman Yanak & Ford LLP is a full-service CPA firm, headquartered in Pittsburgh, Pennsylvania. Their accounting and consulting service offerings include audit and assurance, tax advisory and compliance, business valuation and litigation support, business advisory/ management consulting, and ERP solutions.

Jeffrey A. Ford is a Founding Partner at Grossman Yanak & Ford LLP. He has over 30 years of experience, focused in audit and assurance, M&A transactions, and technology consulting. Jeff has served a variety of ownership groups including public and private companies, private equity groups and international investors. He currently serves on the AICPA Governing Council.


Published: Auditing, Reporting & Compliance Newsletter, No. 05, Spring 2021 l Photo: Byelikova Oksana - stock.adobe.com

 

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