Impaired Independence

1. CPA has direct financial interest regardless of immateriality OR material indirect interest
2. Audit fees remain unpaid for 1 year+ prior to the issuance of the current audit report**
3. CPA has a management position with a client
4. CPA makes hiring decisions for a client
5. Litigation (exception: immaterial amounts unrelated to audit)
6. Contingent fees

**Notice also the period to look at is one year from the issuance date of the current year report. The CPA can perform the work without the prior year fee being paid, but he cannot issue the report without the prior year fee being paid. (Source Example)

Auditing through the Computer (CAAT)

Emphasizes input & processing

• Transaction tagging - electronically marks a transaction
• Embedded audit modules - collects transaction data for the auditor
• Test data - runs fictitious data for the auditor
• Integrated test facility (data checks) - runs fictitious data for auditor
• Parallel simulation (re-performance) - process actual client data through auditor controlled program
• Generalized audit software packages - perform tests of controls &substantive tests directly on Client system
• allow the auditor to independently process & verify client electronic data processing records  

Government Auditing

3 Sources of Guidance:

• GAAS
• GAGAS - the Yellow Book (Generally Accepted Government Auditing Standards)
• Single Audit Act

Government Audit Scope (based on the Yellow Book)

In additional to financial statements, audit should include the following considerations:

• Program results
• Compliance with laws & regulations
• Economy & efficiency 

Types of Independence Impairments:

• External - undue influence threat to impact auditor's objective judgment
• Organizational - auditor is in the same reporting unit as the audited entity
• Personal - auditor having personal connection/interest in the audited entity

Syndication vs. Organization Costs - VC

Syndication Cost

• Packaging & selling of the investment/partnership unit & promotion of it
• marketing & fundraising costs
• production of any offering memo/promotional materials
• legal costs associated with offering, due diligence, costs of transferring assets to the partnership

Organization Cost

• legal & accounting fees necessary to form the Fund
• Facilitate the filings of necessary legal documents & regulatory paperwork required at the state & national levels

Overall Note - Management must evaluate costs incurred by the Fund. Generally, syndication costs are associated with the sale of actual investment units & organization costs are associated with costs necessary to legally create the partnership.