Alternative Structures and Government Accountants
As CPAs choose different forms in which to practice public accountingsuch as selling their firms to publicly held companiesthe AICPA is taking steps to make sure the Code of Professional Conduct keeps up with these new developments. The professional ethics executive committee issued an exposure draft that would ensure application of the code to CPAs regardless of whether they practice in alternative structures or in more traditional practice forms.
The ED uses a hypothetical traditional firm (Oldfirm) purchased by a publicly held corporation as an example. Some of Oldfirms owners and employees continue to offer nonattest services on behalf of their new employer, the publicly held corporation. Some Oldfirm partners form Newfirm, owned by a CPA majority, to provide attest services. Newfirm leases employees and office space from the public company parent, which also may provide billing, advertising and other services for Newfirm. In return, Newfirm pays to the public company an amount determined as a percentage of revenues or profits.
The proposed statement addresses the applicability of the Code of Conduct to these alternative forms of practice in three areas: independence (Rule 101), non-CPA ownership (Rule 505) and equality of enforcement of the Code among members in all practice forms (Rule 505).
Know the Code
Codes applicability to government auditors
The ED does not limit itself to alternative structures. Another key component of the draft, according to Lisa Snyder, senior technical manager in the AICPA professional ethics division, is the applicability of the Ethics Codes independence rules to federal, state and local government auditors. The proposed change would modify the Codes definition of a client so that government accountants would be considered in public practice. Basically, said Snyder, if certain criteria are met, CPAs employed by federal, state and local government agencies would be considered to be in the practice of public accounting. If they are independent under Code rules, they could issue GAAS reports. Of course, those CPAs would be subject to all other rules applicable to members in public practice.
Two other portions of the ED are relatively minor and address
- The applicability of independence rules to former owners of accounting firm.
- Staff members who remove client files or proprietary information upon termination of employment.
The comment period for Omnibus Proposal of Professional Ethics Division Interpretations and Rulings runs until July 15. To order a copy, call the Institute at 888-777-7077 or go to www.aicpa.org/members/ethics/index.htm .