EXHIBIT C

woReoossy guORe|aassy 10 OMON
oN coaueysissy ‘syed 10) spaay WOW) 189} 0} UE}

oN esulil Jo Waurssassy spoon,

ON :gS¥al Due d¥¥B Jo eauaBanwog 10} uoneanpy

Uorg0e} fesodoud fuojoenp {2 ‘Loney Feueye eisqany Auo-SeequieUl YOnody |
upyompu pos ‘bas papuex Bupneu eure Bugoqew papues-o9 -saa)K9g 1ayI0

oN ZeS)eusjay 1984] uojiepossy 880g
Sa) :gSloqMay Usama pajsedxq SjeLIaay
dana) 198d YaOly Woy stiodey :welBiodd Jonuog

woo o og jase 1udesG0e6 ayoods Buses vo peso 3HOMpeU 4 Logerbosse Je\jo Aue
{ua pa yyeun‘saujsnput yo fue peox]ssosne seowes Alosipe eaiowloo fo oBue!
puoid 0 ]¢esoejdeyieW upezs-unypaw uepuedepu :sjwewreuinbey diystoquiey)|
edo

"UOREQOSSY ZUOTLE|oOsSY 10 NOMVON
‘59, caaueys|ssy ‘es| Had 10) spoay jenwojod ,srequleyy 189 04 UE}

1) Woes seed fuoje|syes ‘suoyeloosse/spseog Bugunonde eu ‘ae
ur equia yess an ‘hyeiousg :squowaninbay diysraquioyy|

‘sey, ‘8ye7 Sesoyy/uosdwoy, pue eUNy YeNNS :WHLY “S"7) SEI]EWS
‘onsioues4 ueg/urysieqqag yBeqe] eays sua} “s"n sabe]
See Ju! ym uoreDosse ‘gf “sy Buypoday

Ng

NG

ub

Bio Enos GoM,
SroyeqorSisuxpuyosspua:FeR-3
LUSL-€95L-00-09 304
00/-8851-00-¥7

241 ¥OO APO3 uopuey

nun aul J-¢

Srequrey ada, @pL-LP

deep /oeug/ oo SEpRSSOUrHMN 79),
woo swepessouxpumveU!YOos 123

0081 ling "epIsveAty M109

ojpauig eayoarg "UE 00S,
uonaauucg swepy Ssow ayy,

CPA Practice Management Forum « February 2008

12

AICPA0000017


« Being connected with the client as an employee or in any capacity
equivalent to a member of client management (for example, being
listed as an employee in client directories or other client publications,
permitting himself or herself to be referred to by title or description
as supervising or being in charge of the client's internal audit
function, or using the client's letterhead or internal correspondence
forms in communications)

The foregoing list is not intended to be all-inclusive.

Services involving an extension of the procedures that are generally of
the type considered to be extensions of the member's audit scope applied
in the audit of the client's financial statements, such as confirming of
accounts receivable and analyzing fluctuations in account balances, are
not considered internal audit assistance services and would not impair
independence even if the extent of such testing exceeds that required by
generally accepted auditing standards. In addition, engagements
performed under the attestation standards would not be considered
internal audit assistance services and therefore would not impair
independence.

Transition

Independence would not be impaired as a result of the more restrictive
requirements of interpretation 101-3, provided the provision of any such
nonattest services are pursuant to arrangements in existence on
December 31, 2003, and are completed by December 31, 2004, and the
member was in compliance with the preexisting requirements of this
interpretation.

[Formerly paragraph .04, renumbered by adoption of the Code of
Professional Conduct on January 12, 1988. Revised, effective June 30,
1990, by the Professional Ethics Executive Committee. Revised, effective
May 31, 1999, by the Professional Ethics Executive Committee. Revised,
effective April 30, 2000, by the Professional Ethics Executive Committee.
Revised, July 2002, to reflect conforming changes necessary due to the
revision of interpretation 101-1. Revised, effective December 31, 2003
(except for the documentation requirement, which takes effect for any
new engagements that begin after December 31, 2004), with earlier
application permitted, by the Professional Ethics Executive Committee.
Revised, effective October 31, 2004, by the Professional Ethics Executive
Committee. Revised, effective January 27, 2005, by the Professional
Ethics Executive Committee.]

EXHIBIT E

AICPA0000036


proceedings before a taxing authority.

Preparing a tax return and transmitting the tax return and related tax
payment to a taxing authority, in paper or electronic form, would not
impair a member's independence provided the member does not have
custody or control {43 over the client's funds and the individual
designated by the client to oversee the tax services:

« Reviews and approves the tax return and related tax payment; and,
« If required for filing, signs the tax return prior to the member
transmitting the return to the taxing authority.

However, signing and filing a tax return on behalf of client management
would impair independence, unless the member has the legal authority to
do so and:

a. The taxing authority has prescribed procedures in place for a client to
permit a member to sign and file a tax return on behalf of the client
(for example, Form 8879 or 8453), and such procedures meet, at the
minimum, standards for electronic return originators and officers
outlined in I.R.S. Form 8879; or

b, An individual in client management who is authorized to sign and file
the client’s tax return provides the member with a signed statement
that clearly identifies the return being filed and represents that:

1. Such individual is authorized to sign and file the tax return;

2. Such individual has reviewed the tax return, including
accompanying schedules and statements, and it is true, correct
and complete to the best of his or her knowledge and belief;
and

3. Such individual authorizes the member or another named
individual in the member's firm to sign and file the tax return
on behalf of the client.

Authorized representation of a client in administrative proceedings before
a taxing authority would not impair a member’s independence provided
the member obtains client agreement prior to committing the client to a
specific resolution with the taxing authority. However, representing a
client in a court {14 to resolve a tax dispute would impair a member’s
independence.

Transition
Independence would not be impaired as a result of the more restrictive
requirements of the tax compliance services provisions provided such
services are pursuant to engagements commenced prior to February 28,
2007, and completed prior to January 1, 2008, and the member complied
with all applicable independence interpretations and rulings in effect on
February 28, 2007.

Appraisal, Valuation, and Actuarial Services

Independence would be impaired if a member performs an appraisal,
valuation, or actuarial service for an attest client where the results of the
service, individually or in the aggregate, would be material to the
financial statements and the appraisal, valuation, or actuarial service
involves a significant degree of subjectivity.

Valuations performed in connection with, for example, employee stock
ownership plans, business combinations, or appraisals of assets or
liabilities generally involve a significant degree of subjectivity.

EXHIBIT E

AICPA0000032


EXHIBIT C

u
Sek geoueIs|ssy ‘asi adtey 104 spaay fejludjod ,Siaqwayy 199 01 Weld
S94 gull
9, :2¥ ple dY¥9 J0 sauaBvenuog 10} wojeanp3
‘ory aus 9 ut
-dojorep uy siequious Joyo jS1se Im |4oIUe padojnap aneY ely sIEqWEWY :S99]}9ELd OYO]N
sea 2, ul sdno6 you epadseqUaloq09
svouyed fenuue ‘eouaseyuoo xeyjipne ‘sieuyed mau ‘sle6eueW Jo, swesBoud dlysiepe9 ‘e0u0
“sjuoo sl@uyed BuBevew ‘Sfanuns seyjo fanuns uaa Bevew 20
x “1913 "LO ‘0 “(Seuer) 19 “(reaf/jerones)

‘syeuuayas (Jul Uo uo paGiveyo (%) 64) Bane

-sluwpe ‘sjeulejes 2sewop J

‘suaqueo Aujend yaoi 464)

Ayo ‘puejnayy‘syodemuUIN 4 uoniewesaidey Gupyaa

s0pe9 ‘ E Bal

GOvOd) Uy eoprs9s-|ny Yuapvadepul ‘jase Ul SUL Buypee| BuoWR oq ysnul ‘AYAIsn|sKe
euO}LUe ‘esmede ‘ojur e1eys “ajed|ayyed o Buyyym eq Js :Suawelnbay diysiec

ut
oN geoueys|ssy ‘asiyiady 10) spaen
94 ¢SU

2SVI Pue d¥¥9 10 eauafanuog 10) uoeanpy

suoyenpe sseuisng 0s)n0‘SooNLes ALOSIAPEJUSURSAAL

‘wosduou ‘6 ‘coqzesd yop ‘8 [ea ‘lojeap ciny “S99]!0E1g BYOIN

WALSY DG ON WTX OTH

sIeqUEW ene eSeqeep UELUEH -ZPes/ oj} BupEAL sf MOH

‘yeuuoysanb Anuoy:eHaqH4g Bup{VedL ‘S94 jL

oh :esyeuajoy YORI] Won eossy S90q

oN :estoquiay uaamyag pajoada sjeuajay

oe go wos snd abn ynteg Ae%D

LDU ya uaqeosse ‘7 :sy Guproday

‘wooesmyp' aM sa

woo jeusede at 00m

woo eusedaxproprun :H-3
(0246-68-60 se
080-068-609

‘8Y9-£0900 MN ‘uojsould
8991x090"

wepiserg Aopny |1eW09
wO9'LINSVd9

CPA Practice Management Forum ¢ February 2008

AICPA000001 1


EXHIBIT C

sSausng JaMNn]> SJ27]OM e

H99*

ON goouesissy

IOOSSy ZuONe|ONSSy 10 WORION]

noun voyejoosse ‘sf :sy Buyyoday

60 eeM HM 90,4
uno Bu auaypere 12-3

Sugunoaay jo wonepossy waisay

CPA Practice Management Forum ¢ February 2008

16

AICPA0000021


EXHIBIT F


EXHIBIT B

g. A statement that the auditor believes that his or her audit provides a reasonable
basis for his or her opinion

h. An opinion as to whether the financial statements present fairly, in all material
respects, the financial position of the Company as of the balance sheet date and
the results of its operations and its cash flows for the period then ended in
conformity with generally accepted accounting principles. The opinion should
include an identification of the United States of America as the country of origin
of those accounting principles (for example, accounting principles generally
accepted in the United States of America or U.S. generally accepted accounting
principles @£ )

i, The manual or printed signature of the auditor's firm
j. The date TM of the audit report

The form of the auditor's standard report on financial statements covering a single year is as
follows:

Independent Auditor's Report

We have audited the accompanying balance sheet of X Company as of December 31, 20XX, and
the related statements of income, retained earnings, and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management. Our
responsibility is to express.an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to in the preceding present fairly, in all material
respects, the financial position of X Company as of [at] December 31, 20XX, and the results of
its operations and its cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America.

[Signature]

[Date]

The form of the auditor's standard report on comparative financial statements “? is as follows:

Independent Auditor's Report

AICPA0000003


Corporate finance—

consulting or
advisory

Executive or
employee search

comparative analysis of
the client’s investments to
third-party benchmarks.

Review the manner in
which a client's portfolio is
being managed by
investment account
managers, including
determining whether the
managers are (1)
following the guidelines of
the client’s investment
policy statement; (2)
meeting the client’s
investment objectives;
and (3) conforming to the
client's stated investment
styles.

Transmit a client's
investment selection to a
broker-dealer or
equivalent provided the
client has authorized the
broker-dealer or
equivalent to execute the
transaction.

Assist in developing .
corporate strategies.

Assist in identifying or
introducing the client to
possible sources of capital
that meet the client’s
specifications or criteria. «

Assist in analyzing the
effects of proposed
transactions including
providing advice to a

client during negotiations
with potential buyers,
sellers, or capital sources. «

Assist in drafting an
offering document or
memorandum.

Participate in transaction
negotiations in an
advisory capacity.

Be named as a financial
adviser in a client's

private placement
memoranda or offering
documents.

Recommend a position .
description or candidate

Have custody of client

assets, such as taking

temporary possession

of securities purchased
by a client.

Commit the client to
the terms of a
transaction or
consummate a
transaction on behalf of
the client.

Act as a promoter,
underwriter, broker-
dealer, or guarantor of
client securities, or
distributor of private
placement memoranda
or offering documents.

Maintain custody of
client securities.

Commit the client to

employee compensation

EXHIBIT E

AICPA0000030


EXHIBIT C

BOVOd ‘waNra! seed YaOIY Woy Spode

neal Seed Kea

woo BAU HM 2M
wos voyeuossej@sueyseyo| Ie
(Sz1-208-L0p 32
0S21-208-20P |
aeyg ‘SN ‘Bueyseyg Aue
woo epaupsebooyy 1 —-3
Y8V6-L8P1-02-bb 324
Oh LBHL-O-HF

WN 846 91M
ywans faye} b
1G eaqnoex ‘sa6pH J261N
lonewayy] Ee

13

CPA Practice Management Forum February 2008

AICPAQ000018


EXHIBIT D

Characteristics of a Network
Sharing Common Brand Name

4. When the association is formed for the purpose of cooperating to enhance the firms’
capabilities to provide professional services and when the members of the association
or entities controlled by members of the association share the use of a common brand
name or share common initials as part of the firm name, the association is considered
to be a network.

A firm that does not use a common brand name as part of its firm name but makes
reference in its stationery or promotional materials to being a member of an
association of firms should carefully consider how it describes that membership and
take steps to avoid the perception that it belongs to a network. The firm may wish to
avoid such a perception by clearly describing the nature of its membership in the
association, for example, by stating on its stationery or promotional material that it is
“an independently owned and operated member firm of XYZ Association.”

Sharing Common Control

6. When the association is formed for the purpose of cooperating to enhance the firms’
capabilities to provide professional services and when the entities within the
association are under common control (as defined by generally accepted accounting
principles in the United States of America) with other firms in the association through
ownership, management, or other means (for example, by contract), it is considered to
be a network. However, compliance with association requirements as a condition of
membership does not indicate that members are under common control; rather, it
reflects the type of cooperation that is expected when an entity joins the association.

Sharing Profits or Costs

7. When the association is formed for the purpose of cooperating to enhance the firms’
capabilities to provide professional services and when the firms share profits or costs,
the association is considered to be a network. However, the sharing of immaterial
costs or costs related to operating the association does not by itself create a network.
In addition, the sharing of costs related to the development of audit methodologies,
manuals, and training courses does not by itself create a network. Further, an
arrangement between a firm and an otherwise unrelated entity to jointly provide a
service or develop a product does not by itself create a network.

Sharing Common Business Strategy

8. When the association is formed for the purpose of cooperating to enhance the firms’
capabilities to provide professional services and when the entities within the

AICPA0000023


EXHIBIT C

9) “2st Due ayW9 J0 eouaBianuog 10} wojteanp3|
Wyoud-J0}-)0U |

a9 jens ‘uumcepuey o9poeld aN
1. yuuedaBorens‘sKouns uoyoeses 1
“Suyjnsuco gyi ‘voneyse yeaneu ‘Anns (cy) SoNSIES FOUBULY :SaQ}Mag ‘on

1's “(souen) Ly

LN 'LW'IT' 1 H'9"Ld ‘13 109 8 “Coen 2 Nouonbay) by :papyaold Seaqaras,
ON :ZS}euajay yDed] UO}VePOSSY Seog

on :gstaquray waamjag paved sjeuajoy

neyo ood ygOIY Woy siodey zwresBoug jonuog AYeND

uojewuasaiday Guyyaag

enuates [enue Uo pase 6798 ca/oU0N
feuogewqu Sd

‘woo yomaukespe| Bows MAM 994A
WooTwstepooioo/ qe EA-3

15

CPA Practice Management Forum » February 2008

AICPA0000020


Business risk
consulting

Information
systems—design,
installation or
integration

specifications.

Solicit and perform
screening of candidates e
and recommend qualified
candidates to a client
based on the client-
approved criteria (e.g.,
required skills and
experience).

Participate in employee
hiring or compensation
discussions in an advisory
capacity.

Provide assistance in °
assessing the client’s
business risks and control
processes.

Recommend a plan for
making improvements to

a client’s control

processes and assist in
implementing these
improvements.

Install or integrate a °
client's financial
information system that
was not designed or
developed by the member.
(e.g., an off-the-shelf
accounting package).

Assist in setting up the
client's chart of accounts
and financial statement
format with respect to the
client's financial .
information system.

Design, develop, install,

or integrate a client's
information system that is,
unrelated to the client's
financial statements or
accounting records.

Provide training and
instruction to client
employees on an
information and control
system.

Tax Compliance Services

or benefit
arrangements.

Hire or terminate client
employees.

Make or approve
business risk decisions.

Present business risk
considerations to the
board or others on
behalf of management.

Design or develop a
client's financial
information system.

Make other than
insignificant
modifications to source
code underlying a
client's existing
financial information
system.

Supervise client
personnel in the daily
operation of a client’s
information system.

Operate a client’s local
area network (LAN)
system.

Tax compliance services addressed by this interpretation are preparation

of a tax return 12
related tax payment to the taxing authority, signing and filing a tax
return, and authorized representation of clients in administrative

transmittal of a tax return and transmittal of any

EXHIBIT E

AICPA0000031


EXHIBIT C

‘oyeoossy GuONe|20Ssy 10 4LOMIDH
ON gaoueys|ssy ‘asiyiathx 10} spaeN
ON gSulay zaquiayy jo juaissessy speay

ue xe ‘Bugunooce ‘ypne) sronpoud 2109
souyed sed (98e$) S93"

UOFERESEY ZUOME|OGSSY 10
adhe] 10) Speay [ENUelOg SiaqWOW 19a}y 0} UEld

euossajoid jéwoud 2410 eayiwwUicd ul oweAjoNUl ‘MeIAAd Jeed jnyssBoINS ‘eek eoueIe]LOO
‘auo jSea| Je pUAYE SAUL ‘sjeuoIssajoud xis WnuUIy) :SyuawaNNbay diysiaquiayy

ont

woo Uo}san mm 094
woo uoysani@uo! eW-3
288-2Ob-ShZL-by Xe{
0e-Orh-Sh2L-Y0

815 29 2883 ‘pojsUIIND
‘ypeolddy suok) pjeyurds
‘anuag sseuisng sok] pjeljBunds

PU euoqewe-2J6=Ur HMM 9044
Woo vewmysserepueWIRYSU
uve-€82-194 84
OS6E-E22-18L

neyo “S'f"ueWINYS UNseYY

051-118-409
paved Bs PEA 'a WeDo
anu

CPA Practice Management Forum ¢ February 2008

10

AICPA0000015


EXHIBIT C

oqeoossy ZuONE|OOSSY 10 OMEN
sa, gaauers|ssy ‘asyradrg 10) spoon [eua}od ;S1aqwayy 199 0} WE}
‘ON gSulil 1oquoy Jo Woulssessy speay
59) :2S¥al PUE dYY Jo eauabiramuog 105 uoneanp
seoyoedd sseuisng jews ‘Seonoeid
238 ‘UONRneA ssousng ‘Suynjoenuew youd
9g eakojdue ‘I

ue)
s2pasn oul Guppea sj MoH
fue

0K & oom] ZeNeHD BupyaedL ‘SBA

‘tuo sasodind uo euuiy

uy sum Jopisu09 Mm,
enuera pu siouyed ayssei66e ‘Bunok y

anual jo aBqusaiad st

[Ruotewzqy Ny Jo Uo|Be es eoueUry YUON

610 eu 9094
Wor vouuerqueyurmefosunown :eU-3
‘0102-68-04

‘junoosip jueynsuoo/opuan,

L008 09 ‘evouny |
HOA MANY'09 SSE (098 eung ‘peoy owed 'S 1582
Joa eAgna—xg "POOH fea
-vouy, 10 S'N YBno1yy uopeuwopy Sy Buns ‘Pecuge paseq UoNeIOOSse | an oy 2h 9 ° ’ 0 eaaury YHON-{BUON EWI NOY
(oluosjoaja) payentoe) uoNNGUISip sena|sMaN) “D
Weeeee’ | ong 1d) palioe| uoNNGUISIp JayaISMAN)
/sel)0P SN] ‘1/ESS6h'| punod ysnug/seliop “S'N :600z ‘ZL “Uer ‘Sayed AOUaLINO Uo paseg Sie||Op °¢'f] 0} Sa}es BBUEYyOXg 0
PaOU BSI MJsyJO SSajUN 0/1/01 PUB ZO/1/0} UeEMIEg A\jesAUaH sasnBy anuanay :a,ON N
Ww
‘Wels areys ylomyony KalpelgoW WSH pue LoNepUNOY WHY 11 7
W S'¥82$ 'eoLewWy YON Buipnjou! ‘anuanal jeqo|6 ‘aunfiy anuanal UeoVeWY YON 44 nN y
LO/18/2} Guipua poled 404 | eOURUBIUIEW pue Hulsoy Jo/pue ued v
” 1
. H
Uuo}eziuefvo quawabeuew # 9
peBieyo 29) eg | 3
IS .HOS, 10} 3d) “3
weifoid ma}nel Jaed eW04 “x Jealuyoa} 10} 349“.
ssaBueyoxa JIS JEUONEUIOIL(M,
‘SUJI) JAqUAL 40 UOABIOSSE 10 Ayor}qnd ajeseUaB Jey) SKaAsNs JO/pue Yoeasal ANeyaLidoly |, BIA (SiO}eNSIUIWpe WY/SO09 ‘ Jew ‘Sq ‘'6'a) sdnouB sed MT
SeOUasB|UOD—jAY/SISe9 GaAYSISeOpOd ] ‘aayyrasyo 10
Jeuesul Ajuo siaquieyy “| Ul (SiO}ASIUIWPe WIH}/SQOD ‘BuyayseW ‘sy “6'2) sdnouB saad Is uy afueyoxa Uo!ewsojul/bt
Ss
¥u

aouejsisse/sweaBoid seosnosad uewny pue Burynsoay

i)

8

(Kouenbay) sGunsawyszouaiajuod saquey) “y
rsapog a9|Auag

CPA Practice Management Forum ¢ February 2008

AICPAQ000007


Specific Examples of Nonattest Services

The examples in the following table identify the effect that performance of
certain nonattest services for an attest client can have on a member's
independence. These examples presume that the general requirements in
the previous section "General Requirements for Performing Nonattest
Services" have been met and are not intended to be all-inclusive of the
types of nonattest services performed by members.

Impact on Independence of Performance of Nonattest Services

Type of Nonattest Independence Would Not Be Independence Would Be

Service

Impaired

Impaired

Bookkeeping

Non tax
disbursement.

.

.

Record transactions for
which management has
determined or approved
the appropriate account
classification, or post
coded transactions to a
client’s general ledger.

Prepare financial
statements based on
information in the trial
balance.

Post client-approved
entries to a client's trial
balance.

Propose standard,
adjusting, or correcting
journal entries or other
changes affecting the
financial statements to
the client provided the
client reviews the entries
and the member is
satisfied that
management understands
the nature of the
proposed entries and the
impact the entries have
on the financial
statements,

Using payroll time records e

provided and approved by
the client, generate
unsigned checks, or
process client's payroll.

Transmit client-approved
payroll or other
disbursement information
to a financial institution
provided the client has
authorized the member to
make the transmission
and has made
arrangements for the

Determine or change
journal entries, account
codings or classification
for transactions, or
other accounting
records without
obtaining client
approval,

Authorize or approve
transactions.

Prepare source
documents.

Make changes to source
documents without
client approval.

Accept responsibility to
authorize payment of
client funds,
electronically or
otherwise, except as
specifically provided for
with respect to
electronic payroll tax
payments.

Accept responsibility to
sign or cosign client
checks, even if only in
emergency situations.

EXHIBIT E

AICPA0000028


EXHIBIT E


EXHIBIT B

+ Explanatory language added to the auditor's standard report, Certain
circumstances, while not affecting the auditor's unqualified opinion on the
financial statements, may require that the auditor add an explanatory paragraph
(or other explanatory language) to his or her report.

* Qualified opinion. A qualified opinion states that, except for the effects of the
matter(s) to which the qualification relates, the financial statements present fairly,
in all material respects, the financial position, results of operations, and cash
flows of the entity in conformity with generally accepted accounting principles.

+ Adverse opinion. An adverse opinion states that the financial statements do not
present fairly the financial position, results of operations, or cash flows of the
entity in conformity with generally accepted accounting principles.

+ Disclaimer of opinion. A disclaimer of opinion states that the auditor does not
express an opinion on the financial statements.

These opinions are discussed in greater detail throughout the remainder of this section.

AICPA0000005


We have audited the accompanying balance sheets of X Company as of December 31, 20X2 and
20X1, and the related statements of income, retained eamings, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to in the preceding present fairly, in all material
respects, the financial position of X Company as of [at] December 31, 20X2 and 20X1, and the
results of its operations and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.

[Signature]
[Date]

[As amended, effective for reports issued or reissued on or after June 30, 2001, by Statement on
Auditing Standards No. 93.]

.09

The report may be addressed to the company whose financial statements are being audited or to
its board of directors or stockholders. A report on the financial statements of an unincorporated
entity should be addressed as circumstances dictate, for example, to the partners, to the general
partner, or to the proprietor. Occasionally, an auditor is retained to audit the financial statements
of a company that is not a client; in such a case, the report is customarily addressed to the client
and not to the directors or stockholders of the company whose financial statements are being
audited.

10

This section also discusses the circumstances that may require the auditor to depart from the
standard report and provides reporting guidance in such circumstances. This section is organized
by type of opinion that the auditor may express in each of the various circumstances presented;
this section describes what is meant by the various audit opinions:

+ Unqualified opinion. An unqualified opinion states that the financial statements
present fairly, in all material respects, the financial position, results of operations,
and cash flows of the entity in conformity with generally accepted accounting
principles. This is the opinion expressed in the standard report discussed in
paragraph 08. -

EXHIBIT B

AICPA0000004


EXHIBIT C

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CPA Practice Management Forum ¢ February 2008

AICPA0000016


EXHIBIT C

CPA PRACTICE
MANAGEMENT FORUM

February 2009 Part 2 Volume 5, No. 2

2009 Annual Directory of CPA Firm Associations and Networks

In challenging economic times, public accounting firms can find strength and enhanced value in the resources
of CPA firm associations and networks. Across the country and the globe, in such cities as Las Vegas, Phoenix,
Seattle, Sacramento, Denver, Detroit and Cleveland (to name a few), associations and networks are looking for

a few good members to add to their teams. CCH’s Annual Directory of CPA Firm Associations and Networks
details 41 associations and networks—taking a look at what they offer, what they're looking for, how much it
costs to participate and more! This year's survey adds new information on the geographic distribution of member
firms, the association/network distinction, and whether associations and networks are providing member
education regarding the anticipated convergence of GAAP with IFAS. Enjoy!

February 2009

@.CCH

a Wolters Kluwer business

AICPAQ000006


EXHIBIT D


EXHIBIT A


EXHIBIT C

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CPA Practice Management Forum ¢ February 2008

AICPAQ000009


EXHIBIT C

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CPA Practice Management Forum « February 2008

AICPAQ000008


EXHIBIT E

time or desire), the member's provision of these services would impair
independence.

3. Before performing nonattest services, the member should establish
and document in writing 8 his or her understanding with the client

(board of directors, audit committee, or management, as
appropriate in the circumstances) regarding the following:

a. Objectives of the engagement
b. Services to be performed
c. Client's acceptance of its responsibilities
d. Member's responsibilities
e. Any limitations of the engagement
The documentation requirement does not apply to:
a. Nonattest services performed prior to January 1, 2005.

b. Nonattest services performed prior to the client becoming an
attest client, 2

General requirements 2 and 3 above do not apply to certain routine
activities performed by the member such as providing advice and
responding to the client's questions as part of the normal client-member
relationship.

General Activities

The following are some general activities that would impair a member's
independence:

Authorizing, executing or consummating a transaction, or otherwise
exercising authority on behalf of a client or having the authority to do
so

Preparing source documents, {8 in electronic or other form,
evidencing the occurrence of a transaction

« Having custody of client assets

Supervising client employees in the performance of their normal
recurring activities

Determining which recommendations of the member should be
implemented

Reporting to the board of directors on behalf of management

« Serving as a client’s stock transfer or escrow agent, registrar, general
counsel or its equivalent

e Establishing or maintaining internal controls, including performing
ongoing monitoring activities TM2 for a client

AICPA0000027


.05 101-3—Performance of nonaitest services.

Before a member or his or her firm ("member") performs nonattest
services (for example, tax or consulting services) for an attest client, ®5
the member should determine that the requirements described in this
interpretation have been met. In cases where the requirements have not
been met during the period of the professional engagement or the period
covered by the financial statements, the member's independence would
be impaired.

Engagements Subject to Independence Rules of Certain
Regulatory Bodies

This interpretation requires compliance with independence regulations of
authoritative regulatory bodies (such as the Securities and Exchange
Commission [SEC], the General Accounting Office [GAO], the Department
of Labor [DOL], and state boards of accountancy) where a member
performs nonattest services for an attest client and is required to be
independent of the client under the regulations of the applicable
regulatory body. Accordingly, failure to comply with the nonattest
services provisions contained in the independence rules of the applicable
regulatory body that are more restrictive than the provisions of this
interpretation would constitute a violation of this interpretation.

General Requirements for Performing Nonattest Services

1. The member should not perform management functions or make
management decisions for the attest client. However, the member
may provide advice, research materials, and recommendations to
assist the client's management in performing its functions and
making decisions.

2. The client must agree to perform the following functions in
connection with the engagement to perform nonattest services:

a. Make all management decisions and perform all management
functions;

b. Designate an individual who possesses suitable skill,
knowledge, and/or experience, preferably within senior
management, to oversee the services;

c. Evaluate the adequacy and results of the services performed;
and

d. Accept responsibility for the results of the services;

The member should be satisfied that the client will be able to meet all of
these criteria and make an informed judgment on the results of the
member's nonattest services. In assessing whether the designated
individual possesses suitable skill, knowledge, and/or experience, the
member should be satisfied that such individual understands the services
to be performed sufficiently to oversee them. However, the individual is
not required to possess the expertise to perform or re-perform the
services.

In cases where the client is unable or unwilling to assume these
responsibilities (for example, the client does not have an individual with
suitable skill, knowledge, and/or experience to oversee the nonattest
services provided, or is unwilling to perform such functions due to lack of

EXHIBIT E

AICPA0000026


EXHIBIT C


EXHIBIT C

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CPA Practice Management Forum ¢ February 2008

14

AICPAQ000019


member provides advice about the facts, issues, and strategy of a
matter. The consultant does not testify as an expert witness before a
trier of fact.

The performance of litigation consulting services would not impair
independence provided the member complies with the general
requirements set forth under this interpretation, {21 However, if the
member subsequently agrees to serve as an expert witness,
independence would be considered to be impaired.

c. Other services are those litigation services where a member serves
as a trier of fact, special master, court-appointed expert, or arbitrator
(including serving on an arbitration panel), in a matter involving a
client. These other services create the appearance that the member
is not independent. Accordingly, if a member serves in such a role,
independence would be considered to be impaired. However,
independence would not be considered impaired if a member serves
as a mediator or any similar role in a matter involving a client
provided the member is not making any decisions on behalf of the
parties, but rather is acting as a facilitator by assisting the parties in
reaching their own agreement. fn

Investigative services include all forensic services not involving actual
or threatened litigation such as performing analyses or investigations
that may require the same skills as used in litigation services. Such
services would not impair independence provided the member
complies with the general requirements set forth under this
interpretation,

Transition

Independence would not be impaired as a result of the more
restrictive requirements of the forensic accounting services
provisions, provided such services are pursuant to engagements
commenced prior to February 28, 2007, and the member complied
with all applicable independence interpretations and rulings in
existence on February 28, 2007.

Internal Audit Assistance Services

Internal audit services involve assisting the client in the performance of
its internal audit activities, sometimes referred to as “internal audit
outsourcing." In evaluating whether independence would be impaired
with respect to an attest client, the nature of the service needs to be
considered.

Assisting the client in performing financial and operational {23 internal
audit activities would impair independence unless the member takes
appropriate steps to ensure that the client understands its responsibility
for directing the internal audit function, including the management
thereof. Accordingly, any outsourcing of the internal audit function to the
member whereby the member in effect manages the internal audit
activities of the client would impair independence.

In addition to the general requirements of this interpretation, the
member should ensure that client management:

© Designates an {251 individual or individuals, who possess suitable
skill, knowledge, and/or experience, preferably within senior
management, to be responsible for the internal audit function;

EXHIBIT E

AICPA0000034


e Determines the scope, risk, and frequency of internal audit activities,
including those to be performed by the member providing internal
audit assistance services;

.

Evaluates the findings and results arising from the internal audit
activities, including those performed by the member providing
internal audit assistance services; and

Evaluates the adequacy of the audit procedures performed and the
findings resulting from the performance of those procedures by,
among other things, obtaining reports from the member.

The member should also be satisfied that the client's board of directors,
audit committee, or other governing body is informed about the
member's and management's respective roles and responsibilities in
connection with the engagement. Such information should provide the
client's governing body a basis for developing guidelines for management
and the member to follow in carrying out th responsibilities and
monitoring how well the respective responsibilities have been met.

The member is responsible for performing the internal audit procedures
in accordance with the terms of the engagement and reporting thereon.
The performance of such procedures should be directed, reviewed, and
supervised by the member. The report should include information that
allows the individual responsible for the internal audit function to
evaluate the adequacy of the audit procedures performed and the
findings resulting from the performance of those procedures. This report
may include recommendations for improvements in systems, processes,
and procedures. The member may assist the individual responsible for
the internal audit function in performing preliminary audit risk
assessments, preparing audit plans, and recommending audit priorities.
However, the member should not undertake any responsibilities that are
required, as described above, to be performed by the individual
responsible for the internal audit function.

The following are examples of activities (in addition to those listed in the
“General Activities" section of this interpretation) that, if performed as
part of an internal audit assistance engagement, would impair
independence:

« Performing ongoing monitoring activities or control activities (for
example, reviewing loan originations as part of the client's approval
process or reviewing customer credit information as part of the
customer's sales authorization process) that affect the execution of
transactions or ensure that transactions are properly executed,
accounted for, or both, and performing routine activities in
connection with the client's operating or production processes that
are equivalent to those of an ongoing compliance or quality control
function

Determining which, if any, recommendations for improving- the
internal control system should be implemented

Reporting to the board of directors or audit committee on behalf of
management or the individual responsible for the internal audit
function

Approving or being responsible for the overall internal audit work
plan including the determination of the internal audit risk and scope,
project priorities, and frequency of performance of audit procedures

EXHIBIT E

AICPA0000035


EXHIBIT D

association share a common business strategy, the association is considered to be a
network. Sharing a common business strategy involves ongoing collaboration among
the firms whereby the firms are responsible for implementing the association’s
strategy and are held accountable for performance pursuant to that strategy. An
entity’s ability to pursue an alternative strategy may be limited by the common
business strategy because as a member it must act in accordance with the common
business strategy and therefore in the best interest of the association. An entity is not
considered to be a network firm merely because it cooperates with another entity
solely to market professional services or respond jointly to a request for a proposal for
the provision of a professional service.

Sharing Significant Professional Resources

9. When the association is formed for the purpose of cooperating to enhance the firms’
capabilities to provide professional services and when the entities within the
association share a significant part of professional resources, it is considered to be a
network.

. Professional resources include

common systems that enable firms to exchange information such as client
data, billing, and time records;

partners and staff;

technical departments to consult on technical or industry specific issues,
transactions, or events for assurance engagements;

audit methodology or audit manuals; and

training courses and facilities.

The determination of whether the professional resources shared are significant should
be made based on both qualitative and quantitative factors.

. When the entities within the association do not share a significant amount of human
resources or significant client information (for example, client data, billing, and time
records) and have the ability to make independent decisions regarding technical
matters, audit methodology, training, and the like, the entities are not considered to be
sharing a significant part of professional resources.

. When the shared professional resources are limited to a common audit methodology,
audit manuals, training courses, or facilities, and when they do not include a
significant amount of human resources or client or market information, the shared
professional resources are not considered significant. However, when the shared
professional resources involve the exchange of client information or personnel, such
as where staff are drawn from a shared pool, or a common technical department is
created within the association to provide participating firms with technical advice that
the firms are required to follow, a reasonable and informed third party is more likely
to conclude that the shared professional resources are significant. An entity generally

AICPA0000024


EXHIBIT B

AU Section 508

Reports on Audited Financial Statements

* * *

The Auditor's Standard Report
07

The auditor's standard report states that the financial statements present fairly, in all material
respects, an entity's financial position, results of operations, and cash flows in conformity with
generally accepted accounting principles. This conclusion may be expressed only when the
auditor has formed such an opinion on the basis of an audit performed in accordance with
generally accepted auditing standards.

08

The auditor's standard report identifies the financial statements audited in an opening
(introductory) paragraph, describes the nature of an audit in a scope paragraph, and expresses the
auditor's opinion in a separate opinion paragraph. The basic elements of the report are the
following:

a. A title that includes the word independent =
6. A statement that the financial statements identified in the report were audited

c. A statement that the financial statements are the responsibility of the Company's
management and that the auditor's responsibility is to express an opinion on the
financial statements based on his or her audit

d. A statement that the audit was conducted in accordance with generally accepted
auditing standards and an identification of the United States of America as the
country of origin of those standards (for example, auditing standards generally
accepted in the United States of America or U.S. generally accepted auditing
standards)

e. A statement that those standards require that the auditor plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement

f A-statement that an audit includes—

(1) Examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements

(2) Assessing the accounting principles used and significant estimates made
by management

(3) Evaluating the overall financial statement presentation @

AICPA0000002


EXHIBIT C

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CPA Practice Management Forum ¢ February 2008

AICPA0000012


EXHIBIT C

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CPA Practice Management Forum ¢ February 2008

AICPA0000014


EXHIBIT B


Accordingly, if these services produce results that are material to the
financial statements, independence would be impaired.

An actuarial valuation of a client's pension or postemployment benefit
liabilities generally produces reasonably consistent results because the
valuation does not require a significant degree of subjectivity. Therefore,
such services would not impair independence. In addition, appraisal,
valuation, and actuarial services performed for nonfinancial statement
purposes would not impair independence. M45 However, in performing
such services, all other requirements of this interpretation should be met,
including that all significant assumptions and matters of judgment are
determined or approved by the client and the client is in a position to
have an informed judgment on, and accepts responsibility for, the results
of the service.

Forensic Accounting Services

For purposes of this interpretation, forensic accounting services {16 are
nonattest services that involve the application of special skills in
accounting, auditing, finance, quantitative methods and certain areas of
the law, and research, and investigative skills to collect, analyze, and
evaluate evidential matter and to interpret and communicate findings
and consist of:

« Litigation services; and
« Investigative services.

Litigation services recognize the role of the member as an expert or
consultant and consist of providing assistance for actual or potential legal
or regulatory proceedings before a trier of fact in connection with the
resolution of disputes between parties. Litigation services consist of the
following services:

a. Expert witness services {12 are those litigation services where a
member is engaged to render an opinion before a trier of fact as to
the matter(s) in dispute based on the member's expertise, rather
than his or her direct knowledge of the disputed facts or events.

Expert witness services create the appearance that a member is
advocating or promoting a client’s position. 18 Accordingly, if a
member conditionally or unconditionally agrees to provide expert
witness testimony for a client, {12 independence would be
considered to be impaired.

However, independence would not be considered impaired if a
member provides expert witness services for a large group of
plaintiffs or defendants that includes one or more attest clients of the
firm provided that at the outset of the engagement: 1) the member's
attest clients constitute less than 20 percent of (i) the members of
the group (ii) the voting interests of the group, and (iii) the claim;
(2) no attest client within the group is designated as the “lead”
plaintiff or defendant of the group; and (3) no attest client has the
sole decision-making power to select or approve the expert witness.

While testifying as a fact witness, {2° a member may be questioned
by the trier of fact or counsel as to his or her opinions pertaining to
matters within the member's area of expertise. Answering such
questions would not impair the member's independence.

b. Litigation consulting services are those litigation’services where a

EXHIBIT E

AICPA0000033


INTERPRETATION NO. 101-17, “NETWORKS AND NETWORK FIRMS”

General

1.

To enhance their capabilities to provide professional services, firms frequently join
larger groups, which typically are membership associations that are separate legal
entities that are otherwise unrelated to their members. The associations facilitate their
members’ use of association services and resources; they do not themselves typically
engage in the practice of public accounting or provide professional services to their
members’ clients or to other third parties. Firms and other entities in the association
cooperate with the firms and other entities that are members of the association to
enhance their capabilities to provide professional services. For example, a firm may
become a member of an association in order to refer work to or receive referrals from
other association members. That characteristic alone would not be sufficient for the
association to constitute a network or for the firm to be considered a network firm.
However, an association would be considered a network under this interpretation if
one or more additional characteristics of a network are shared in addition to
cooperation among member firms (ET section 92 par. 28). These additional
characteristics are discussed further on in this interpretation.

A network firm is required to be independent of financial statement audit and review
clients of the other network firms if the use of the audit or review report for the client
is not restricted as defined by professional standards. For all other attest clients,
consideration should be given to any threats the firm knows or has reason to believe
may be created by network firm interests and relationships. If those threats are not at
an acceptable level, safeguards should be applied to eliminate the threats or reduce
them to an acceptable level. The independence requirements apply to any entity
within the network that meets the definition of a network firm (ET section 92 par.
29).

Whether an association is a network and whether an entity is a network firm should
be applied consistently by all members of the association. Due consideration should
be given to what a reasonable and informed third party would be likely to conclude
after weighing all the specific facts and circumstances. The determination that a firm
or other entity or an association of firms or other entities meet the definition of a
network firm and a network, as herein defined, is solely for purposes of this
interpretation and should not be used or relied upon in any other context. In
particular, the determination of whether a firm or other entity is a network firm or an
association of firms or other entities is a network for purposes of defining legal
responsibilities from one firm to the other, or to third parties, is beyond the scope of
this interpretation. The definitions contained herein should not be used or relied upon
for that purpose.

EXHIBIT D

AICPA0000022


EXHIBIT A

ET Section 101 - Independence
01 Rule 101—Independence.

A member in public practice shall be independent in the performance of
professional services as required by standards promulgated by bodies
designated by Council.

[As adopted January 12, 1988.]

AICPA0000001


Benefit plan
administration {11

Investment—
advisory or
management

financial institution to .
limit the corresponding
individual payments as to
amount and payee. In
addition, once

transmitted, the client
must authorize the
financial institution to .
process the

information {10
Communicate summary ¢
plan data to plan trustee.

Advise client management
regarding the application e
or impact of provisions of
the plan document.

Process transactions

(e.g., investment/benefit
elections or
increase/decrease
contributions to the plan; «
data entry; participant
confirmations; and
processing of distributions.
and loans) initiated by
plan participants through
the member's electronic
medium, such as an
interactive voice response
system or Internet
connection or other
media.

Prepare account
valuations for plan
participants using data
collected through the
member's electronic or
other media.

Prepare and transmit
participant statements to
plan participants based on
data collected through the
member's electronic or
other medium.
Recommend the allocatione
of funds that a client
should invest in various
asset classes, depending
upon the client's desired
rate of return, risk
tolerance, etc.

Perform recordkeeping
and reporting of client's
portfolio balances

including providing a

Maintain a client’s bank
account or otherwise
have custody of a
client’s funds or make
credit or banking
decisions for the client.

Approve vendor
invoices for payment

Make policy decisions
on behalf of client
management.

When dealing with plan
participants, interpret
the plan document on
behalf of management
without first obtaining
management's
concurrence.

Make disbursements on
behalf of the plan.

Have custody of assets
of a plan.

e Serve a plan asa

fiduciary as defined by
ERISA.

Make investment.
decisions on behalf of
client management or
otherwise have
discretionary authority
over a client's
investments.

Execute a transaction to
buy or sell a client's
investment.

EXHIBIT E

AICPA0000029


The guidance will be included as a footnote to Interpretation 101-17. The footnote text will
provide as follows: “Members should review the implementation guidance issued by the Ethics
Division regarding this Interpretation 101-17. The guidance may be found on the AICPA/Ethics
Division website.”

DRAFT GUIDANCE

Paragraph 2 of Interpretation 101-17 — Networks and Network Firms [ET section 101.19]
requires a network firm to be independent of financial statement audit and review clients of the
other network firms if the use of the audit or review report for the client is not restricted as
defined by professional standards. Accordingly, before entering into an engagement or
arrangement to perform audit or review services, a member who practices in a network firm
should determine whether other firms in the network (or their personnel) have a prohibited
relationship (i.¢., a relationship that would impair independence under the AICPA Rules of
Professional Conduct) with a prospective or existing client.

When making inquiries of other network firms, members should be careful to abide by
applicable antitrust law and avoid sharing information that may be deemed to be competitively
sensitive (or is otherwise confidential client data). To evaluate independence, the member
should endeavor to obtain as much information as is reasonably possible from the prospective or
existing audit or review client by asking, for example, whether any of the network firms are its
professional service providers, investors, lenders, directors, or otherwise have relationships that
may impair independence.

The member should determine that he or she has obtained the necessary information to make a
determination that the firm is independent prior to accepting the audit or review engagement. To
the extent that the member inquires of other network firms to ascertain the firm’s independence,
that inquiry should be limited to asking the other network firms whether they had potentially
prohibited relationships with or provided potentially prohibited non-audit services to the
prospective or existing client during the relevant time period and should not entail
communications about any other entity’s bid(s), bidding strategy, capacity to bid, pricing, or
other terms of competition.

EXHIBIT F

AICPA0000037


EXHIBIT D

is not deemed a network because it occasionally uses personnel of another member
firm to assist with an engagement, such as observing a client’s physical inventory
count.

Sharing Common Quality Control Policies and Procedures

13. When the association is formed for the purpose of cooperating to enhance the firms’
capabilities to provide professional services and when the entities within the
association are required to follow common quality control policies and procedures
monitored by the association, it is considered to be a network. Monitoring is the
process comprising an ongoing consideration and evaluation of the firms’ systems of
quality control, the objective of which is to enable the association to obtain
reasonable assurance that the firms’ systems of quality control are designed
appropriately and operating effectively.

Effective date

This interpretation will be effective for engagements covering periods beginning on or
after December 15, 2010.

AICPA0000025


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CPA Practice Management Forum e February 2008

AICPA0000010


EXHIBIT C

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CPA Practice Management Forum ¢ February 2008

AICPA0000013