PEEC releases exposure drafts on recruiting and tax services

The AICPA Professional Ethics Executive Committee (PEEC) on Monday released for public comment exposure drafts on recruiting and tax services for attest clients that, if adopted as final, will apply to members in public practice.

Comments for both exposure drafts are due by Sept. 10 and should be emailed to ethics-exposuredraft@aicpa.org.

Harmonization with international standards

One of PEEC’s strategic objectives is promoting consistency in global ethics and independence standards. To accomplish this, PEEC employs a rigorous process of considering the International Ethics Standards Board for Accountants’ projects to evaluate whether related changes will enhance the AICPA Code of Professional Conduct (the AICPA Code) and better protect the public interest.

The proposed changes to the “Executive or Employee Recruiting” interpretation (ET §1.295.135) and the “Tax Services” interpretation (ET §1.295.160) were identified through this process. PEEC believes these changes will keep the AICPA Code fit for purpose in a rapidly changing, global environment and serve to protect the public interest by helping members maintain independence.

Recruiting

The proposed revisions to the “Executive or Employee Recruiting” interpretation address potential threats to independence when members perform recruiting services for attest clients.

PEEC determined that when a member is providing recruiting services to an attest client, there could be additional threats to a member’s independence other than those the Code currently outlines. PEEC is proposing adding prohibitions around recruiting for key positions. These new prohibitions include:

• Advising on the specific terms of employment, remuneration, or related benefits of a particular candidate;
• Searching for candidates;
• Undertaking reference checks of candidates; and
• Recommending to the attest client only one candidate for consideration (as opposed to recommending a slate of candidates).

The exposure draft outlines the particulars of PEEC’s requested feedback from members and other interested parties, including whether the additional threats and prohibitions are appropriate.

Tax services

The proposed revisions to the “Tax Services” interpretation address potential threats to independence when members perform tax advisory and planning services to attest clients. A primary concern from a public interest perspective is that when a member or member’s firm provides tax advisory and planning services to an attest client, a reasonable and informed third party might conclude that the member is in a position to advocate on the client’s behalf.

PEEC determined the AICPA Code will be enhanced with revisions to the “Tax Services” interpretation that address potential threats to independence when members do more than provide preparation and transmittal services.

The proposed revisions add the advocacy threat to the scope of the interpretation and expand the scope of the services covered by the interpretation to include tax advisory and planning services. The proposal establishes circumstances in which a member can provide these services without impairing independence. If the circumstances are not met, the proposed tax treatment must be at least more likely than not to be allowable under applicable tax law or regulations in order to maintain independence.

The exposure draft has details of PEEC’s request for comments, including what practitioners think about providing attest clients with these services when they involve a higher level of uncertainty.

PEEC welcomes comments on all aspects of the proposed revisions to the Code in addition to the specific aspects of the proposed interpretations.

These revisions, PEEC said, are important because they aim to address potential threats to independence and ensure that the guidance is up-to-date and fit for purpose. By providing feedback on the proposed revisions, members and other interested parties can help shape the future of the industry and ensure the effectiveness of the new guidance.

— Kelly D. Mullins is the communications 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.