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The firm's loaned staff do not participate in and are unable to influence the attest engagement covering any period that includes the staff augmentation arrangement.The firm does not expect the staff augmentation arrangement to reoccur.The firm expects that the arrangement will be brief, presumably 30 days or less.
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Specifically, a staff augmentation arrangement would be permissible if the attest client encounters an unexpected situation that creates significant hardship for the client to make other arrangements and all the following additional safeguards are met. However, the arrangement may be permitted under very limited conditions. For this reason, the interpretation generally precludes a firm's staff augmentation arrangement with an attest client. Given the client's role in supervising the staff's day- to- day work, the appearance of independence is a prime consideration. The new interpretation addresses possible familiarity, management participation, advocacy, and self- review threats to the firm's independence. The interpretation fills a void in the Code that required members to evaluate staff augmentation arrangements for attest clients using the " Conceptual Framework for Independence" interpretation (ET §1.210.010) and converges the Code with provisions in the International Code of Ethics for Professional Accountants (including International Independence Standards), which addresses these arrangements under " Temporary Personnel Assignments" (§525). Staff augmentation arrangements differ from typical professional services engagements because the client's management - not the firm's - will supervise the firm's personnel ("loaned staff") and direct their work. WHAT IS A STAFF AUGMENTATION ARRANGEMENT?Ī "staff augmentation" or loaned staff arrangement exists when a firm lends its personnel to a client to supplement or "augment" the client's staff for a certain period.
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Note that the material in the article applies only to audits and other attest services of nonpublic companies. This article highlights these changes to the Code's independence rules and related (nonauthoritative) guidance.