Revisions proposed to AICPA ethics code address certain SEC rule changes

By Ken Tysiac

Revisions to four interpretations and one definition were proposed Tuesday by the AICPA Professional Ethics Executive Committee (PEEC) in an effort to address amended independence rules issued by the SEC in October 2020.

The SEC's amendments to certain requirements in Rule 2-01 of Regulation S-X were designed to prevent the triggering of auditor independence rules violations in situations that don't necessarily impair an auditor's judgment or impartiality.

PEEC appointed a task force to determine whether the AICPA Code of Professional Conduct (the Code) needs to be changed to address the SEC's amended rules. PEEC is proposing to:

  • Change its definition of "beneficially owned" (ET §0.400.06), clarifying that the definition could include a record owner and should be applied when the phrase "beneficial ownership interest" is used.
  • Add certain student loans and consumer loans as permitted under its "Loans and Leases With Lending Institutions" interpretation (ET §1.260.020).
  • Replace references to "officer, director, or 10 percent or more owner" with "an officer or director with the ability to affect decision-making and any individual with a beneficial ownership interest (known through reasonable inquiry) that gives the individual significant influence over the attest client." This affects the "Loans" (ET §1.260.010), "Loans and Leases With Lending Institutions" (ET §1.260.020), and "Client Affiliates" (1.224.010) interpretations.
  • Clarify that when evaluating materiality to a covered member under its "Immediate Family Members" interpretation (ET §1.270.010), members should also consider the loans of immediate family members. Currently, the AICPA Code calls for members to consider only the materiality of financial interests.
  • Provide additional guidance when a financial statement attest client is involved with an acquisition or other transaction that results in a new affiliate under its "Client Affiliates" interpretation (ET §1.224.010).

Public comments on the proposal can be submitted through Jan. 5 by email at Ethics-ExposureDraft@aicpa.org or online at aicpa.org/ethicscomments.

Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA's editorial director.

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