New revisions published by the AICPA Professional Ethics Executive Committee (PEEC) clarify the definitions of "client" and "attest client," and clarify the member's responsibilities when the engaging entity is not also the person or entity with respect to which the member is performing the services (i.e., the subject entity).
The revisions are available at aicpa.org and take effect Dec. 31, 2017, unless otherwise noted.
One revision to the definition of "client" in the AICPA Professional Standards clarifies that when the engaging entity is not also the subject entity of the engagement, members will have two separate clients within the same engagement. The revision clarifies the application of the "Records Requests" interpretation and the "Confidential Client Information Rule" in these situations.
The relocation of an exception for government employees was the impetus behind the second revision in the definition of "client." The exception permits government employees to audit the government that employs them without impairing their independence when certain safeguards exist. The exception was moved out of the definition of "client" and into the "Simultaneous Employment or Association With an Attest Client" interpretation to give it better visibility.
The revision of the definition of "attest client" requires members to be independent of only the subject entity when engaged by an entity that is not the subject of the engagement. Previously, the definition required the member to be independent of both the engaging and subject entities.
PEEC reasoned that threats to independence should not apply to entities that are not the subject of an attest engagement. This treatment is consistent with the AICPA auditing standards as well as the treatment in the AICPA Code of Professional Conduct for engagements with different engaging and subject entities for engagements under the Statements on Standards for Attestation Engagements.
Under the revisions to "attest client," members still need to analyze their relationship with engaging entities in these situations, as these relationships could give rise to threats to a member's compliance with the "Integrity and Objectivity Rule."