Under what conditions is independence not impaired for a CPA serving a publicly held company?

The reasoning behind the answer being that serving clients without a financial oversight role does not impair a CPA’s independence lies in the fundamental principle of independence itself. A CPA must maintain an objective mindset, free from conflicts of interest, while providing audit and attestation services. When a CPA serves a client without any financial oversight responsibilities, it minimizes any potential conflicts or biases that could arise from financial interests in the client’s operations or outcome.

This condition ensures that the CPA can perform their duties impartially, adhering to ethical standards that require them to remain both independent in fact and appearance. Independence is crucial in preserving the integrity of the financial reporting process, particularly for publicly held companies that are subject to greater scrutiny by regulators and the public. Therefore, as long as the CPA avoids any financial oversight role, their independence remains intact.

In contrast, providing limited non-audit services could potentially create a perceived or actual conflict of interest, while receiving compensation based on results poses a clear threat to impartiality, as it could motivate the CPA to act in a way that prioritizes client satisfaction over factual and objective reporting. Consulting engagements, while different from audit services, may still lead to a scenario where the CPA could compromise their independence, especially if those engagements involve financial matters.