How does serving on a client's board of directors affect an individual's independence?

Serving on a client's board of directors fundamentally affects an individual's independence because it creates a direct financial or managerial relationship with the client. Independence in a professional context, particularly for CPAs, is crucial to maintaining objectivity and impartiality in an audit or advisory engagement.

When a CPA serves on a client's board, they are no longer able to be viewed as an independent party. This association supersedes considerations of location, such as being in a different office, or the nature of the role, such as an honorary position. The mere fact of holding a position on the board signifies a level of involvement and influence over the client's operations, which compromises the CPA's objectivity.

Professional ethics standards, notably those upheld by bodies such as the AICPA, specify that any direct involvement with a client in a managerial capacity, such as serving on a board, would impair independence. This principle is critical as it helps to ensure that CPAs provide unbiased opinions that stakeholders can rely on without question.