The proposed revision to the definition of “client” makes it clear that when an entity engaging a licensee to perform a professional service is not the same entity that is subject to the professional service, the two entities are separate clients. For example, if a bank engaged a licensee to perform an audit of an association, the bank (the engaging entity) and the association (the subject entity) would be two separate clients.
Under the proposed revision to the definition of “attest client”, only the subject entity would be considered an attest client, which is consistent with auditing standards. As a result, the proposal also clarifies that when the engaging entity is not also the subject entity, the licensee need not be independent of the engaging entity unless required under the Client Affiliate interpretation [1.224.010].
Thus, in the above example, the bank would be the client and the association would be the attest client. The licensee would not need to be independent of the bank, but he or she would need to be independent of the association.
Finally, the proposed revision reminds licensees to comply with the “Integrity and Objectivity Rule” [1.100.001], including the “Conflicts of Interest” interpretation [1.110.010], with respect to both the engaging entity and the subject entity.
The Exposure Draft will be released for comment in mid-December, when it will be available for download here.