The AICPA's Conceptual Framework approach: when no specific rule governs, the auditor evaluates threats and applies safeguards. Safeguards include firm-level controls (e.g., partner concurring reviews), profession-level controls (e.g., licensing, standards), and client-level controls (e.g., audit committees). If safeguards cannot reduce threats to an acceptable level, the auditor must decline or terminate the engagement.

Government Auditing Standards (Yellow Book) impose additional independence requirements beyond AICPA standards for auditors performing government engagements. The GAGAS personal independence requirements cover financial relationships and employment impairments; organizational independence covers the structure of the audit organization relative to the audited entity.

Key Terms:

• Independence in Fact: The auditor's actual state of mind — free from bias, conflict, or undue influence
• Independence in Appearance: A reasonable and informed third party would conclude the auditor is independent
• Professional Skepticism: Questioning mind + critical assessment of evidence; does not assume management is honest or dishonest
• Cooling-Off Period (SOX): 1-year period before former audit partner/manager can work for a public-company audit client in a financial reporting oversight role
• Familiarity Threat: Long association with a client may cause the auditor to be too sympathetic to client interests
• Advocacy Threat: Auditor promotes client's position to the point that objectivity is compromised (e.g., expert witness testimony in a dispute)

---