Proposed Uniform Approach to Independence

1. The Ethics and Strategic Professional Issues Committee Kent J. Bailey, CPA - Presenter 2010 NASBA Regional Meetings Proposed Uniform Approach to Independence

2. Submitted by: The Ethics and Strategic Professional Issues Committee Gaylen R. Hansen, CPA, Chair Kent J. Bailey, CPA, Subcommittee Chair Steven Corbeille Andrew L. DuBoff, CPA Gary Fleming, CPA Wayne Michael Fritz, CPA Patrick D. McCarthy, CPA Marianne Mickelson, Ed. D. Carla E. Sledge, CPA Cecil Wood, Ph.D PROPOSED UNIFORM DEFINITION OF INDEPENDENCE

3. Definitions for Independence U.S. Securities and Exchange Commission (SEC) U.S. Department of Labor (DOL) Government Accountability Office (GAO) Public Company Accounting Oversight Board (PCAOB) International Federation of Accountants (IFAC) American Institute of CPA's (AICPA) State Boards PROPOSED UNIFORM DEFINITION OF INDEPENDENCE

4. How does your State Board define “independence” for a Licensee and/or a firm? PROPOSED UNIFORM DEFINITION OF INDEPENDENCE

5. Survey Results 23 states define independence indicating a firm/licensee is not independent if certain conditions prevail 15 states reference the AICPA as of a date 4 use their own unique definition PROPOSED UNIFORM DEFINITION OF INDEPENDENCE

6. Where can the public find your definition of independence? PROPOSED UNIFORM DEFINITION OF INDEPENDENCE

7. Code of Professional Conduct State Statutes Administrative Rules PROPOSED UNIFORM DEFINITION OF INDEPENDENCE

8. As a regulator of the Accountancy Profession what is your opinion of state statutes or regulations that refer to the standards of the AICPA? PROPOSED UNIFORM DEFINITION OF INDEPENDENCE

9. In dealing with licensee independence how specific do you believe each state's rules/regulations should be? PROPOSED UNIFORM DEFINITION OF INDEPENDENCE

10. Do you think the time has come to attempt to convince all 55 jurisdictions to adopt a uniform definition of independence? PROPOSED UNIFORM DEFINITION OF INDEPENDENCE

11. Independence of Mind The state of mind that permits the performance of an attest service without being affected by influences that compromise professional judgment, thereby allowing an individual to act with integrity and exercise objectivity and professional skepticism. PROPOSED UNIFORM DEFINITION OF INDEPENDENCE

12. Independence in Appearance The avoidance of facts and circumstances that would cause an informed third party, having knowledge of all relevant information to reasonably conclude that the integrity, objectivity or professional skepticism of a firm or an attest engagement team member had been compromised. PROPOSED UNIFORM DEFINITION OF INDEPENDENCE

13. A licensee engaged in the practice of public accountancy shall: • Conform in mind and appearance to the independence standards adopted by the Board, and/or, where applicable, the : • U.S. Securities and Exchange Commission (SEC), • Government Accountability Office (GAO), • Public Company Accounting Oversight Board (PCAOB), and • Other national or international regulatory or professional standard setting bodies. • The application of any such standard to a firm or licensee's conduct shall be based on the requirements of the standard as of the date of the conduct being evaluated. PROPOSED UNIFORM DEFINITION OF INDEPENDENCE

14. Recommendations We recommend NASBA forward the following uniform definition of independence to the NASBA UAA Committee for consideration. We recommend NASBA continue to work with other regulatory and private sector, standard-setting bodies to promote uniform independence standards. PROPOSED UNIFORM DEFINITION OF INDEPENDENCE

15. After you have reviewed the proposed uniform definition of independence are there changes or clarification that need to be made? PROPOSED UNIFORM DEFINITION OF INDEPENDENCE

16. THANK YOU PROPOSED UNIFORM DEFINITION OF INDEPENDENCE