Industry Insights

Auditor Independence Rules for FDICIA Banks

January 2015
Author:  Doug Van Meter

Doug Van Meter



Financial Services

Two Leadership Square South Tower
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Oklahoma City, OK 73102-9421

Oklahoma City

The Center for Audit Quality and American Institute of CPAs (AICPA) issued a joint letter dated November 19, 2014, clarifying auditor independence rules for certain nonissuer audit and attestation engagements, including all banks of more than $500 million subject to the Federal Deposit Insurance Corporation’s (FDIC) rules and regulations under Part 363 – Annual Independent Audits and Reporting Requirements, also known as FDICIA banks.

The FDIC requires auditors who perform audits of FDICIA banks to comply with the independence standards and interpretations of the AICPA, Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB). To the extent any of the rules within any one of these independence standards is more or less restrictive than the corresponding rule in the other independence standards, the independent public accountant must comply with the more restrictive rule during the period covered by the audit. Therefore, SEC independence rules apply because they are more restrictive in certain areas than AICPA or PCAOB rules.

The joint letter clarifies the SEC position that auditors should not, among other things, provide typing and word processing services or financial statement templates not publicly available to the audit client, as these would be considered prohibited financial statement preparation services. In other words, FDICIA banks must draft, type, format, print and bind their own financial statements or engage a third party to assist them.

This clarification may significantly affect institutions that have used their external auditors for assistance drafting footnotes or providing typing and word processing services.

The full joint letter has more information. To learn more, contact your BKD advisor.

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