Accordingly, as a cornerstone of the profession, auditors must be independent of the entities they audit, in fact and in appearance. Standards prescribed by the AICPA, state boards and societies, SEC, PCAOB, GAO, and DOL all appropriately require this. Advocacy is one of seven broad categories of threats to auditor independence in the AICPA’s Code of Professional Conduct, which arises when an auditor’s actions promote a client’s interests or position. Under this Code, threats to independence may be mitigated by safeguards, but some threats cannot be overcome and impair an auditor’s independence. This creates problems not only for the auditor/firm, but for the client as well because their auditor is no longer independent and a new auditor would have to be engaged.
Some common services provided by firms that provide audits include tax, valuation, and consulting services involving internal controls and accounting systems. When a firm that provides audits also provides these types of services, precautions have to be in place, which can include limitations on the scope of these other services. For example, if your audit firm also provides tax preparation and planning services, those tax professionals could not also act as your advocate with the IRS or state tax authorities, which could be a significant matter since those professionals would be highly knowledgeable of your circumstances and positions on tax matters.
Lam & Company is an audit-focused firm that does not provide tax or valuation services so that our independence is not compromised and our clients can benefit from the full support of their chosen professionals in these other service areas. We believe you deserve a tax professional that can advocate for you if and when the need arises. The internal audit, internal control, and related advisory services we provide contribute to our audit focus, knowledge, and experience. Our audit focus also means that you get auditors doing your audit, not someone that prepares tax returns or provides other services most of the year and then performs audits during their slow time. Audit, accounting, and financial reporting matters can be complex and dynamic and demand constant attention. We focus our attention on auditing, accounting, and financial reporting matters so that we can better serve your needs.
We look forward to providing you with helpful, timely, and useful information going forward.