The Department of Revenue submitted 21 hypothetical client relationship scenarios to the Florida Board of Accountancy (the Board). These hypothetical scenarios attempt to represent the more common types of relationships that CPAs have with clients relating to Florida Sales and Use Tax. The Board has ruled on each of the hypothetical scenarios as indicated.

Professional standards require that a CPA must be independent to perform of Agreed-Upon Procedures. The following rulings are intended to be used as a guide pursuant to the requirements of proposed rule 12-25.033(2) Eligibility and Qualifications for the Certified Audit Program which read, "To be eligible to provide a certified audit service to a taxpayer, the qualified audit firm must be independent with respect to that taxpayer, pursuant to the guidelines established by the Florida Board of Accountancy Advisory opinions issued on certified audit independence questions.

The Department will determine if the circumstances and facts of the particular situation are materially the same as situations for which guidelines were previously issued. If the facts and circumstances are unique or if the qualified audit firm believes there are differences between their situation(s) and the situation(s) previously addressed by the Board that were the basis for the Department to deny participation, then the qualified audit firm can request an Advisory Opinion or a Declaratory Statement from the Board on the particular situation. The Department shall be guided by the Board's response to that request."

SITUATION #1
A CPA prepares Florida sales and use tax returns for a client from 1993 to the present. The CPA prepares the returns based on numbers provided by the client. The CPA only evaluates the numbers for "reasonableness" and, accordingly, does not take responsibility for their accuracy. The CPA signs the returns as preparer.

In 1998, the CPA successfully completes the certification program. The CPA is retained by the subject client to perform a certified audit for the tax period January 1, 1993 to December 31, 1997. Performing the certified audit requires the CPA to review the prepared returns for compliance with Florida Sales and Use Tax laws and rules. The CPA then makes an assertion on the completion of agreed upon procedures and the results.

Conclusion: Independence is not impaired.

SITUATION #2
The same as #1, except the CPA does not sign the return.

Conclusion: Independence is not impaired.

SITUATION #3
The same as #1, except the CPA performs sufficient review to provide assurance the numbers are materially accurate.

Conclusion: Independence is impaired.

SITUATION #4(a)
The CPA provides ongoing compilation and corporate tax return services for a client. In 1994, the client requests, in writing, an interpretation on the taxability of certain sales transactions under Florida Sales Tax laws. The relevant tax law is subject to several different interpretations. The CPA advises in writing that the subject transactions are exempt from Florida Sales Tax.

In 1998, the CPA successfully completes the certification program. The CPA is retained by the subject client to perform a certified audit for the tax period January 1, 1993 to December 31, 1997. Performing the certified audit requires the CPA to review returns that were prepared by the client based on the CPA's interpretation of Sales Tax laws for compliance with Florida Sales Tax laws. The CPA will then make an assertion on the completion of agreed upon procedures and the results.

Conclusion: Independence is not impaired.

SITUATION #4(b)
The same as 4(a), except the CPA advises the client orally.

Conclusion: Independence is not impaired.

SITUATION #5
The same as #4, except the CPA response is based on a Department Technical Assistance Advisement (TAA).

A TAA is provided by the Department upon the request of a taxpayer or taxpayer representative. A TAA states the Department opinion on a specific set of facts. A TAA is binding on the Department for that taxpayer within that specific set of facts.

Conclusion: Independence is not impaired.

SITUATION #6
The same as #5 except the CPA response is based on a Department Letter of Technical Advisement (LTA).

An LTA is non-binding on the Department.

Conclusion: Independence is not impaired.

SITUATION #7
The same as #4, except the request is for an interpretation of taxability of certain sales transactions under the sales and use tax laws of states other than Florida.

Conclusion: Independence is not impaired.

SITUATION #8
The same as #4, except the request is for an interpretation of the taxability of one specific transaction under Florida Sales and Use tax.

The CPA performs the certified audit on all transactions except the subject transaction. The CPA fully discloses the facts regarding that single transaction and its tax treatment in the report. The Department then determines the taxability of that specific transaction.

Conclusion: Independence is not impaired.

SITUATION #9
The CPA performs a management consulting service for a client. The service is to design an accounting system. The accounting system generates the numbers that the client uses to prepare their Florida Sales Tax returns.

In 1998, the CPA successfully completes the certification program. The CPA is retained by the subject client to perform a certified audit for the tax period January 1, 1993 to December 31, 1997. Performing the certified audit requires the CPA to review returns that were based on numbers generated by the accounting system for compliance with Florida Sales Tax laws. The CPA then makes an assertion on the completion of the agreed upon procedures and the results.

Conclusion: Independence is not impaired.

SITUATION #10
The CPA performs an Internal Accounting Control review engagement for a client. The engagement is to render an opinion on the adequacy of the internal accounting controls for the accounting system. The accounting system generates the numbers that the client uses to prepare their Florida Sales Tax returns.

In 1998, the CPA successfully completes the certification program. The CPA is retained by the subject client to perform a certified audit for the tax period January 1, 1993 to December 31, 1997. Performing the certified audit requires the CPA to review returns that were based on numbers generated by the accounting system for compliance with Florida Sales Tax laws. The CPA will then make an assertion on the completion of agreed upon procedures and the results.

Conclusion: Independence is not impaired.

SITUATION #11
The CPA reviews the accounting system as part of a financial statement audit. The accounting system generates numbers that are used by the client to prepare their Florida Sales and Use Tax returns. A recommendation for an improvement to the accounting system is made in the Management Letter Comments that is part of the audit report.

Conclusion: Independence is not impaired.

SITUATION #12
The CPA participates as a contract auditor for the FDOR under section 213.28, Florida Statutes, and Rule 12-25, Florida Administrative Code. The CPA uses the training and experience obtained as a contract auditor to provide a Florida Sales Tax self-audit service to a client. The client engages the CPA to use the Department audit procedures and training to review tax returns for the period 1993 to 1997. The CPA determines the subject returns are correct.

In 1998, the CPA successfully completes the certification program. The CPA is retained by the subject client to perform a certified audit for the tax period January 1, 1993 to December 31, 1997. Performing the certified audit requires the CPA to review returns that were previously reviewed in the self audit for compliance with Florida Sales Tax laws. The CPA will then make an assertion on the completion of agreed upon procedures and the results.
Conclusion: Independence is not impaired.

SITUATION #13
The same as #12, except the CPA determines there is a material tax liability in the reviewed returns. The CPA reports this to the client. The client elects not to amend the subject returns.

Conclusion: Independence is not impaired.

SITUATION #14
In 1998, the CPA successfully completes the certification program. The CPA has a client that is interested in participating, but first asks the CPA to perform a pre-certified review. The CPA does, without Department involvement, and provides the results to the client. Based on the results provided by the CPA, the client elects to participate.

The CPA is retained by the subject client to perform a certified audit for the subject tax period. Performing the certified audit requires the CPA to review the returns that were previously reviewed in the pre-certified review.

Conclusion: Independence is not impaired.

SITUATION #15
The CPA provides financial statement attestation services for a client for 1993 to 1997. The Sales Tax expense and related transactions are material to the financial statements.

In 1998, the CPA successfully completes the certification program. The CPA is retained by the subject client to perform a certified audit for the tax period January 1, 1993 to December 31, 1997.

erforming the certified audit requires the CPA to review returns that, if determined to include significant errors, could materially impact the 1993 to 1997 financial statements for compliance with Florida Sales Tax laws. The CPA then makes an assertion on the completion of agreed upon procedures and the results.

Conclusion: Independence is not impaired.

SITUATION #16
The same situation as #15, but the Sales Tax expense and related transactions are immaterial to the financial statements.

Conclusion: Independence is not impaired.

SITUATION #17
The CPA prepares Federal tax returns for a client for 1993 to 1997. The CPA does not provide any other services to the client.

In 1998, the CPA successfully completes the certification program. The CPA is retained by the subject client to perform a certified audit for the tax period January 1, 1993 to December 31, 1997. The CPA then makes an assertion on the completion of agreed upon procedures and the results.

Conclusion: Independence is not impaired.

SITUATION #18
The CPA performs a valuation of stocks service for a client in 1995. The CPA does not provide any other services to the client.

In 1998, the CPA successfully completes the certification program. The CPA is retained by the subject client to perform a certified audit for the tax period January 1, 1993 to December 31, 1997. The CPA then makes an assertion on the completion of agreed upon procedures and the results.

Conclusion: Independence is not impaired.

SITUATION #19
The CPA provides an expert testimony service for a client in 1995. The expert testimony involves Sales Tax issues.

In 1998, the CPA successfully completes the certification program. The CPA is retained by the subject client to perform a certified audit for the tax period January 1, 1993 to December 31, 1997. The CPA then makes an assertion on the completion of agreed upon procedures and the results.
Conclusion: Independence is not impaired.

SITUATION #20
Same as #19, except the expert testimony does not involve Sales Tax issues.

Conclusion: Independence is not impaired.

SITUATION #21
The CPA has a proprietary interest in a client. The services the CPA provides do not violate professional standards.

In 1998 the CPA successfully completes the certification program. The CPA is retained by the subject client to perform a certified audit for the tax period January 1, 1993 to December 31, 1997. The CPA then makes an assertion on the completion of agreed upon procedures and the results.

Conclusion: Independence is impaired.