Gloria and Deloria, CPAs, have recently started their public accounting firm and intend to provide attestation and a variety of consulting services for their clients, which are all nonpublic. Both Ms. Gloria and Mr. Deloria have particular expertise in designing payroll and other disbursement systems. Ms. Gloria is concerned about whether any of the following services would impair their audit independence.
a. For each of the services in the accompanying table provide a judgment as to whether providing the service would impair attest independence. In all 12 situations, assume that management has designated a management-level individual to be responsible for overseeing the CPA€™s services and has established appropriate internal control. Also assume that the client is privately held and does not report to the SEC.
b. Now assume that the 12 services are being contemplated for nonattest clients. Which of the services does the AICPA Code of Professional Conduct prohibit under thisassumption?

Transcribed Image Text:

Independence Additional Information Impaired (Yes, No, Situation Number Needed for Service Description Indeterminate Indeterminate" Replies 1Customize and implement a prepackaged payroll system 2 Manage the portion of a client's local area network system related to payroll 3Using payroll time records approved by management, generate unsigned payroll checks on a continuing basis for the client the client signs the checks. 4 Prepare the payroll tax return form and sign it on behalf of management. 5 Approve employee time card 6 Accept responsibility to sign checks, but only in emergency situations. 7 Monitor employee time cards and make changes when errors are detected Post client-approved entries to client's trial balance 9Provide all the initial training and instruction to client employees on a newly implemented payroll information and control system 10 Screen candidates and recommend the most highly quali- 11 Supervise client personnel in the dally operation of the 12 Present payroll business risk considerations to the boarc fied candidate to serve as treasurer for the client payroll system of directors on behalf of management.