Following is a question and answer transcript highlighting some of the frequent inquiries sent to the MACPA Professional Ethics Task Force. Responses to the inquiries have been tailored to specific questions presented and may not consider all of the unique circumstances that are part of an ethical inquiry. Attempt your own answers before reading the “unofficial” opinion of the Task Force.

Non-profit organizations that provide services and/or products as mandated by state and federal initiatives may also be required to perform regular assessments of their ongoing programmatic and fiscal responsibilities as they relate to that particular initiative. In some cases, the organization (Entity A) may also be required to contract with another, separate entity (Entity B) to provide a finalized service or product.

If an auditor is engaged to perform attestation services for Entity A, but must also include in that attestation service an audit of Entity B (audited by the same auditor), can this be considered a conflict of interest?

According to Article IV .01 of the Code of Professional Conduct, “independence precludes relationships that may appear to impair a member’s objectivity in rendering attestation services.” Article IV .03 states that “such a member who provides auditing and other attestation services should be independent in fact and appearance.”

Simply put, the auditor who audits both entities may be put into a conflicted situation and therefore would be precluded from performing the audit on Entity A. If an auditor is engaged by Entity A to perform an attestation that includes an audit of Entity B’s attestation and errors are uncovered, the auditor may be conflicted in reporting those errors to Entity A.