September 4, 2009 Exposure Draft Executive Summary 



    The Professional Ethics Executive Committee (PEEC) has issued an exposure draft that proposes revisions to the subsections “Application of the Independence Rules to Covered Members Formerly Employed by a Client or Otherwise Associated With a Client” and “Application of the Independence Rules to a Covered Member’s Immediate Family” of Interpretation No. 101-1, under Rule 101, Independence, of the AICPA Code of Professional Conduct; related revisions to Ethics Ruling No. 107, “Participation in Employee Benefit Plan Sponsored by Client,”; and the subsection “Retirement, Savings, Compensation, or Similar Plans” of Interpretation No. 101-15, “Financial Relationships,” under Rule 101.

    The exposure draft also includes a proposed revision to Ethics Ruling No. 2, “Distribution of Client Information to Third Parties,” along with a proposed new definition of confidential client information under ET Section 92.

    Executive Summary

    The first set of proposals under Rule 101 provide clarification, and in some cases new guidance, for members who were formerly employed or associated (for example, an officer or board member) with an attest client of the firm and on immediate family members who participate in an employer’s benefit plan that is either a client, sponsored by a client, or invests in a client. In certain cases, exceptions to the independence requirements are provided.

    For example, the proposal under “Application of the Independence Rules to a Covered Member’s Immediate Family” concludes that independence would not be considered to be impaired if.

    • An immediate family member of any covered member participated in a client's employee benefit plans, other than certain share-based compensation arrangements or nonqualified deferred compensation plans, provided that, in addition to the safeguards currently required by the existing guidance, the immediate family member does not serve in a position of governance for the plan or have the ability to supervise or participate in the plan’s investment decisions or in the selection of investment options available to plan participants.

    • As a result of permitted employment, an immediate family member of a covered member who does not participate on the attest engagement team and is not in a position to influence the attest engagement participated in certain share-based compensation arrangements or nonqualified deferred compensation plans when such an arrangement or plan is an attest client or is sponsored by an attest client, provided that in addition to the safeguard specified in the current guidance, additional safeguards are applied.

    With respect to the second set of proposals under Rule 301, Confidential Client Information (AICPA, Professional Standards, vol. 2, ET sec. 301 par. .01), the PEEC proposes that the use or disclosure of client information (including masked information) that is not known to be in the public domain or is not available to the public would be considered a breach of client confidentiality unless the member received the client’s consent to disclose or use such information. Although the PEEC understands and appreciates the value of providing client information to third parties for research and benchmarking purposes, it also believes that it would be necessary for a member to determine that the client does not object to sharing such information when it is not publicly available because it may be viewed by the client as being confidential.

    To provide further clarification concerning what client information would be considered confidential, a proposed definition for confidential client information is also included. The proposed definition indicates that information that is not known to be in the public domain or available to the public is considered confidential. The definition also provides examples of information that would not be considered confidential because it would be considered to be in the public domain or available to the public.

    Members and other interested parties are encouraged to comment on this proposal. Comments on this exposure draft will be accepted through November 6, 2009, and should be sent to Lisa A. Snyder, Director, Professional Ethics Division, at

    The document is available for download as a PDF file (see the link at the end of this summary). Adobe Reader is needed to view a PDF file. The reader is available as a free download from the Adobe Web site at

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