1. news
  2. ETHICS

PEEC addresses attest client fees and ethics in professional education

By Kelly D. Mullins

Related

TOPICS

The AICPA Professional Ethics Executive Committee (PEEC) has approved revisions to align the Code of Professional Conduct (the Code) with international standards on attest client fees and to clarify members’ ethical responsibilities when allowable collaboration for professional qualifications and competencies crosses the line into cheating.

The revisions related to fees will necessitate additional planning by AICPA members with attest clients. The clarifications related to collaboration and cheating do not add responsibilities, but members will want to be aware of these changes, especially those who work in an environment with multiple generations who may have a different understanding of collaboration and cheating.

International convergence: Fees and auditor independence

As a member body of the International Federation of Accountants (IFAC), the AICPA has a responsibility to maintain alignment between professional standards and those of applicable international standard-setting bodies. In response to a recent International Ethics Standards Board for Accountants (IESBA) project related to fees, PEEC’s ongoing efforts to substantially converge the Code with IESBA standards resulted in new and revised interpretations.

IESBA undertook its fees project to clarify the fees and pricing practices of professional accountants and ensure consistency with the fundamental principles of its code, particularly auditor independence. IESBA adopted related changes in 2021, and the changes became effective in December 2022.

PEEC’s IESBA Convergence Fees Task Force analyzed IESBA’s changes and set out to develop a principles-based framework for AICPA members to determine when fees and fee dependency impair independence.

After an exposure period of proposed changes earlier this year and review of comments, PEEC approved these new interpretations to align the Code with that of IESBA:

  • The “Determining Fees for an Attest Engagement” interpretation (ET sec. 1.230.030) seeks to ensure that fee determination for an attest client is not influenced by other services provided to that client. The new interpretation clarifies that the attest fee is a standalone fee in the spectrum of total fees for an attest client. The goal is for other services provided for the same client to have no influence on the amount of any attest engagement fee.
  • The “Fee Dependency” interpretation (ET sec. 1.230.040) addresses the self-interest and undue influence threats created when fees from an attest client represent a large proportion of a firm’s fees. The new interpretation provides guidance for firms and covered members to evaluate and address the threats to independence created when the fees from an attest client represent a large proportion of the fees of the firm. The dependence on that client and concern about losing the client create a self-interest or undue influence threat.

Covered members now need to include these fee-related considerations in independence evaluations at the firm level and for each attest engagement. If a fee dependency continues for five years, members will need to put safeguards in place for the affected engagements.

Advertisement

To assist members in identifying fee-related threats, PEEC has updated examples of threats in the “Conceptual Framework for Independence” (ET sec. 1.210.010). The “Client Affiliates” interpretation (ET sec. 1.224.010) is revised to clarify which affiliates are included in the fee-dependency requirements.

All changes will be effective Jan. 1, 2025, with early implementation allowed. Resources related to this project are available online:

Professional qualifications and competencies

Last year, the SEC sanctioned several firms whose employees were discovered sharing answer keys to various CPE courses, and state boards of accountancy have disciplined individuals involved. To clarify AICPA members’ responsibilities in this area, PEEC revised related interpretations for members.

Formerly called “Solicitation or Disclosure of CPA Examination Questions and Answers,” the revised interpretation “Professional Qualifications and Competencies” (ET sec. 1.400.020, 2.400.020, and 3.400.020) broadens the scope from the CPA Exam to all activity related to acquiring and maintaining qualification and competency.

Changes are effective today, and resources related to the project are available online:

— The author is a manager for the AICPA Professional Ethics Division. To comment on this article or to suggest an idea for another article, contact Neil Amato at neil.amato@aicpa-cima.com.