The Paycheck Protection Program (PPP), created by the U.S. government to provide relief to small businesses and some other entities during the coronavirus pandemic, has been unique in the combination of urgency and uncertainty it has presented to CPAs and their clients.
While the PPP has provided much-needed funding and helped keep people on employer payrolls during shutdowns, CPAs and their clients at times have been befuddled by the slow rollout of specific rules and guidance for applications and loan forgiveness by Treasury and the U.S. Small Business Administration, which oversee the $659 billion program.
One of the questions most frequently asked by CPAs related to their PPP loan forgiveness services is whether they are performing a consulting engagement under CS Section 100, Consulting Services: Definitions and Standards, or agreed-upon procedures under Statement on Standards for Attestation Engagements No. 19, Agreed-Upon Procedures Engagements.
Bob Dohrer, CPA, CGMA, the Association of International Certified Professional Accountants’ chief auditor, said the answer to this question depends on what the client is requesting. If the client is asking for help preparing an application for PPP loan forgiveness, it’s likely that the CPA is performing a consulting engagement.
If the client is asking the CPA simply to check work the client has done, perhaps recalculating and agreeing on numbers or amounts from one document to another, this may indicate an agreed-upon procedures engagement.
An additional factor to keep in mind is that in a consulting engagement, CPAs share their work only with the client. In an agreed-upon procedures engagement, the CPA may report to a third party as well as the client. So if the CPA is checking calculations performed by the client for accuracy and then submitting them to the lender, this would not be a consulting engagement.
“It’s really listening to what your client needs,” Dohrer said. “If they need help, it’s probably consulting. If they want you checking something they did, especially if it’s going to go to someone other than the client, you should probably be looking at agreed-upon procedures.”
An additional warning to CPAs is that they may not be able to perform both engagements on the same information for a client because, by checking their own work, they would run the risk of self-review, which can impact independence under the AICPA ethics standards.
For example, if a CPA advises a client and then prepares the forgiveness application as either the client’s agent or without complying with independence requirements for nonattest services (ET §1.295.040), the CPA is not permitted to perform agreed-upon procedures by checking that same application for the purposes of reporting to a third party.
An additional factor the CPA should consider is the need to be enrolled in peer review. Agreed-upon procedures engagements are subject to peer review, while consulting services are not. If the CPA’s firm is not currently enrolled in peer review (say, the firm limits its services to tax and consulting), then the performance of an agreed-upon procedures engagement would require the firm to enroll and undergo a peer review.
The AICPA loan forgiveness services matrix can be used by CPAs to answer many questions related to the services they can provide. Other common questions related to the PPP include:
Q: Will I violate my independence if I provide PPP services to an attest client?
A: Threats to independence may exist when a CPA provides nonattest services (e.g., consulting services) to an attest client. Whether the services can be provided depends on the nature of the services and whether the client is willing and able to meet certain responsibilities.
The “General Requirements for Performing Nonattest Services” interpretation (ET §1.295.040) requires the client to agree to do all of the following:
- Assume all management responsibilities.
- Oversee the service by designating an individual with suitable skills, knowledge, and/or experience.
- Evaluate the adequacy and results of the services performed.
- Accept responsibility for the results of the services.
These responsibilities are required to be documented in writing in the engagement letter before the PPP services can be performed for an attest client.
Q: Can a CPA provide audit, examination, or review services on a PPP engagement?
A: No. To be able to perform services that result in the CPA issuing an opinion or conclusion on PPP loan transactions such as services performed in accordance with Statements on Auditing Standards, Statements on Standards for Attestation Engagements, or Statements on Standards for Accounting and Review Services, suitable criteria must exist for the CPA to measure compliance. Suitable criteria are objective and capable of consistent measurement. That is not present in the PPP rules, Dohrer said.
For example, while eligibility to receive a PPP loan includes a self-certification of “need,” criteria defining what constitutes “need” did not exist when clients were applying for PPP loans.
“When you don’t have objective criteria, you can’t form opinions or conclusions about whether someone has met the requirements of a program,” Dohrer said.
Q: How can a CPA be sure to possess the competence and ability to perform services with due care related to the PPP?
A: Guidance related to the PPP has been delayed and in some cases changed, making it difficult for anyone to guide clients with complete certainty. But Jim Brackens, CPA, CGMA, AICPA vice president–Ethics and Practice Quality, said CPAs who read all the literature associated with the PPP and watch carefully for updates can be competent and perform PPP-related engagements with integrity and due care.
But keeping up with the ever-changing rules is a necessity.
“Just because you were competent two months ago to help the client apply for the loan doesn’t mean you are still competent,” Brackens said. “You have to go look and see what’s changed and make your decisions based on that.”
Q: Is it possible for a CPA to have a conflict of interest or breach AICPA confidentiality requirements while performing PPP forgiveness-related services?
A: It’s possible to encounter a conflict of interest if the CPA firm itself or one of its clients is applying for forgiveness with a bank that also is a client of the same CPA. To address the conflict the CPA should disclose the nature of the conflict of interest to the clients and other appropriate parties affected by the conflict and obtain their consent to perform the services. When making this disclosure, the CPA should be careful not to disclose confidential client information to the other party without consent.
Q: Some firms are forming groups of PPP “specialists” to assist clients with PPP services. Do AICPA or PCAOB rules related to the work of specialists apply in this circumstance?
A: The AICPA and standards refer to specialists in areas such as valuation or actuarial analysis who have specific, prescribed training. Put another way, a specialist is someone possessing specialized skills in areas other than audit, accounting, or tax. Any PPP specialists designated by firms don’t truly possess this type of nuanced expertise, so the specialist standards don’t apply to them, but compliance with fundamental supervision and review requirements still do apply, Dohrer said.
AICPA experts discuss the latest on the PPP and other small business aid programs during a weekly virtual town hall. The webcasts, which provide CPE credit, are free to AICPA members. Go to the AICPA Town Hall Series webpage for more information and to register.
The AICPA’s SBA Paycheck Protection Program Resources page houses resources and tools produced by the AICPA to help address the economic impact of the coronavirus.
For more news and reporting on the coronavirus and how CPAs can handle challenges related to the outbreak, visit the JofA's coronavirus resources page or subscribe to our email alerts for breaking PPP news.
— Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.