International Finance and Accounting Handbook

15 • 34

Country

Concept of Independence

Functions Generally Not Allowed

North and South AmericaArgentina

Based on an objective definition of lack of independence, as

Company employee, partner, chairman, manager, consort or

opposed to general requirement of independence

consanguinity relationship up to fourth degree of the com-pany authorities.

Canada

Defined by rules of professional conduct of the

Provincial

Serving in any function that lessens independence, taking part

Institute of Chartered Accountants and by incorporating acts.

in decision making in a management consultant engagement,

GAAS requires

the audit to be carried out

with

an objective

auditing a corporation where stock in the client is owned

state of mind.

The rules and conduct of Certified General

Accountants require public practitioners to be independent.

Mexico

Prohibits a public accountant from acting as an auditor of a

Not available.

corporation when circumstances exist that may impair his orher objectivity and reduce his or her mental independence orgive such an impression to the public. Statutory auditors areconsidered to be independent.

United States

Must meet standards of independence in both fact and

The functions generally not allowed are described in the

appearance.

ET Section of the AICPA Professional Standards. Recentlypassed Sarbannes-Oxley legislation further defines indepen-dence to include a requirement that the auditor of publicly-owned companies not be allowed to provide consultingservices and to add new requirement for the companies’audit committees.

EuropeThe Netherlands

In recent Dutch auditing literature, independence is described

The auditor cannot undertake any work affecting in

depen-

as functional independence, financial independence, and

dence or impartiality (i.e., acting in a managerial capacity,

relational and mental independence.

accepting an executive appointment in business or industry,or acting as an insurance agent or broker).

United Kingdom

Ethical guidance of RSB’s emphasizes responsibility of auditor

The auditor must not be a director, partner or a shareholder of

to avoid conflict of interest or compromise of independence;

a client company; must not hold close personal relationship

gives examples of situations likely to cause conflict.

with a director, partner or shareholder.

Professional persons must be, and must be seen to be, inde-pendent. The concept of ‘independence’ is not defined in lawor standards.