PEEC updates 2 ethics interpretations

The changes affect specific independence issues.

The AICPA Professional Ethics ­Executive Committee (PEEC) issued revised ethics interpretations addressing state and local government client affiliates and provision of information system services to attest clients.

If you audit reports on the financial statements of state or local governments, you must consider your independence responsibilities when it comes to affiliates of your clients. PEEC updated the previous state and local government interpretation in the AICPA Code of Professional Conduct to clarify those requirements.

The interpretation "State and Local Government Client Affiliates":

  • Clarifies examples of state and local government entities for the purposes of the standard.
  • Changes the language in the standard in numerous places to refer to "financial statement attest client" rather than "state or local government entity."
  • Clarifies the definitions of "investor" and "investment" for the purposes of the standard.
  • Clarifies the circumstances or relationships that create threats to independence.

The revised state and local government interpretation is effective for years beginning after Dec. 15, 2020.

The "Information Systems Services" interpretation addresses self-review and management participation threats to compliance with the Independence Rule when a member provides nonattest services related to an attest client's information systems.

The revised information services interpretation is effective Jan. 1, 2021, and early implementation is allowed.

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