The AICPA Professional Ethics Division and NASBA developed a Cooperative Enforcement Approach to assist State Boards of Accountancy with resolving investigations when a joint referral is received.
Under this arrangement, the Board would defer its own investigation and, with permission from the respondent, obtain the AICPA’s investigative files, including the basis for the deficiencies cited and required remediation. This material acts as a roadmap for the Board in its investigation. This approach is available to Boards at their discretion for DOL and governmental audit cases.
Alternatively, a Board may ask respondents for consent to request the AICPA’s investigative files at any time during or after the Board’s investigation. Boards typically yuse this approach when they learn of the investigation after the AICPA has published the results.
The AICPA encourages Boards to visit the Enforcement web page for links to the Division’s Disciplinary Actions, reports on the most frequent professional standards violations for DOL Investigations and Government and Not-For-Profit Investigations and much more. To learn more about the enforcement process or how your Board can participate in the Cooperative Enforcement Approach, contact Toni Lee-Andrews and Peter DelVecchia of the Professional Ethics Team.
Ethics Standard Setting
The AICPA Professional Ethics Division encourages Boards to monitor its standard setting activities. In addition to the Division’s Exposure Draft web page, where listings of all exposure drafts can be found,, another easy way to monitor changes is to periodically review the New, Revised, and Pending Interpretations and Other Guidance section of the AICPA’s Code of Professional Conduct. This section of the Code lists the citation and title of any new or revised interpretation or other guidance for one year after its effective date.
Highlights from 2017:
- The “Disclosure of Commissions and Referral Fees” [1.520.080] interpretation became effective on January 31, 2017. This interpretation requires the disclosures required by paragraphs .03 and .04 of the “Commissions and Referral Fees Rule” [1.520.001] be made in writing.
- In June 2017, a new “Hosting Services” [1.295.143] interpretation was added to the Code which will be effective September 1, 2018. This interpretation provides that when hosting services are provided, independence will be impaired because the individual will be maintaining the attest client’s internal control over its data or records. The interpretation explains what hosting services would include and provides examples of activities that would and would not be considered hosting services. The Division is monitoring inquires on this topic and plans to issue further non-authoritative guidance to assist with implementation.
- The “Transfer of Files and Return of Client Records in Sale, Transfer, Discontinuance or Acquisition of a Practice” [1.400.205] interpretation became effective June 30, 2017. This interpretation explains what needs to be done with client files when selling or transferring all or part of a practice or the discontinuance of a practice.
Of note is a requirement to “Submit a written request to each client subject to the sale or transfer, requesting the client’s consent to transfer its files to the successor firm and, notify the client that its consent may be presumed if it does not respond to the member’s request within a period of not less than 90 days, unless prohibited by law, including but not limited to the rules and regulations of the applicable state boards of accountancy.” The interpretation goes on to explain that “The member should not transfer any client files to the successor firm until either the client’s consent is obtained or the 90 days has lapsed, whichever is shorter. The member is encouraged to retain evidence of consent, whether obtained from the client or presumed after 90 days.” The interpretation also provides that when acquiring all or part of a practice, the member should be satisfied that all clients of the predecessor firm subject to the acquisition have, as required by the interpretation, consented to the member’s continuation of professional services and retention of any client files or records the successor firm retains.”
- The ““Pressure to Breach the Rules” [2.170.010] interpretation and additions to the “Knowing Misrepresentations in the Preparation and Presentation of Information” interpretation became effective on August 31, 2017. These interpretations are applicable to members in business and industry, but not to members in public practice.
- Revisions to the definitions of “Client” (ET sec. 0.400.07)1 and “Attest Client” (ET sec. 0.400.03) along with numerous related revisions became effective on December 31, 2017. Highlights include:
- For the Client definition:
- (1) Clarification that when the engaging entity is not also the subject of the professional services (subject entity), members will have two separate clients within one engagement and must treat them as separate clients. This clarification helps to address questions raised related to how the “Records Requests” interpretation (ET sec. 1.400.200) and “Confidential Client Information Rule” (ET sec. 1.700.001) should be applied in these situations; and
- (2) The relocation of the government provision from the definition of “Client” to the “Simultaneous Employment or Association With an Attest Client” interpretation (ET sec. 1.275.005) under the Independence Rule (ET sec. 1.200.001).
- For the Attest Client definition clarification that members
- (1) only need to be independent of the subject entity and not the engaging entity, when the two are not the same entity; and
- (2) analyze their relationship with such engaging entities since these relationships could give rise to threats to a member’s compliance with the “Integrity and Objectivity Rule” (ET sec. 1.100.001).
- State Boards are encouraged to reach out to Ellen Goria, Brandon Mercer and James West of the Professional Ethics Team with questions regarding these changes.