Ethics considerations for assisting clients with PPP documents

When it comes to applications for Paycheck Protection Program loans or PPP loan forgiveness, a one-size-fits-all approach to assisting clients won’t work. Some clients will need more help than others, and there are ethical implications for how CPAs provide that assistance. Iryna Klepcha, CPA, and Toni Lee-Andrews, CPA/PFS, CGMA, of the AICPA’s Professional Ethics Division discuss some of the ethical questions that have surfaced as CPAs are assisting clients with PPP loan and forgiveness applications. Their guest is Kelly Hunter, CPA, shareholder at FRK & Co. and a member of the AICPA’s Professional Ethics Executive Committee (PEEC).

What you’ll learn from this episode:

• Why AICPA guidance has changed since PPP applications were first available.
• How firms can maintain independence when assisting with preparation of documents for nonattest clients.
• Details on scenarios CPAs could face when clients ask them for assistance with PPP loan forgiveness applications.
• More from Hunter on his advice: “Don’t impair independence if you don’t have to.”
• Some of the questions coming into the AICPA’s Professional Ethics Division hotline.

Play the episode below or read the edited transcript:

Resources

Here are two previous Ethically Speaking episodes related to the topic:

• “PPP Forgiveness Engagements — Ethics and Other Considerations”
• “PPP Forgiveness Engagements — Ethics Qs & As”

An article on the SBA PPP resources page on future.aicpa.org:

• “Ethical Implications for PPP Loan Forgiveness Documentation”

For further questions, email ethics@aicpa.org or call the hotline at 888-777-7077, option 1, then option 2.

To comment on this episode or to suggest an idea for another episode, contact Neil Amato, a JofA senior editor, at Neil.Amato@aicpa-cima.com.

Transcript:

Neil Amato: Welcome back to the Journal of Accountancy podcast. Today’s show is a special edition, a crossover episode with the Ethically Speaking podcast, which is produced by the AICPA’s Professional Ethics Division. I’m Neil Amato with the Journal of Accountancy, and in this episode, the AICPA’s Iryna Klepcha and Toni Lee-Andrews talk with CPA Kelly Hunter about the ethical implications of helping clients with loan and forgiveness applications for the Paycheck Protection Program.

Iryna Klepcha: Welcome, everyone. I’m Iryna Klepcha, a manager in the AICPA Ethics Division, and I’m here today with Kelly Hunter with FRK & Co., and Toni Lee-Andrews, director in the AICPA Ethics Division. We will be discussing ethical implications related to second draws from the Paycheck Protection Program and forgiveness application. Toni, I know that the AICPA position changed due to some revision to the U.S. Small Business Administration’s (SBA’s) initial PPP application. Could you please tell us what has changed?

Toni Lee-Andrews: Sure, Iryna. You know, our initial guidance was developed when the first round of the Paycheck Protection Program was released, and really was developed pre-portal. So, the AICPA took the position that, by preparing that application, the CPA would be performing a management function on behalf of the client, and, therefore, independence would be impaired.

Klepcha: Kelly, do you mind providing some examples of what your firm has been doing to maintain independence when you prepare applications for attest clients?

Kelly Hunter: Sure, I’d love to, Iryna. The majority of our clients are asking us to just review their applications, really, to make sure that they’ve properly completed them, they have all the necessary information, and then we can go back and look at some of the details behind the numbers they put in there. So that’s the majority of what our clients are asking us to do. For those, the clients that are our attest clients, we do an engagement letter with them, that way, everyone knows what’s happening, what everyone’s responsibilities are. We actually do an engagement letter, which is, the engagement is under the consulting services, but this is also obviously a nonattest service. So, we make sure that the nonattest language is in there from our Ethics Code 1.295, and to make sure that we have all the safeguards in there, and that they agree to perform those necessary safeguards. And accept responsibility for the work that we do.

And there are other clients that we do that aren’t attest clients, but we still get engagement letters for them. That way, we can just make sure everyone’s on the same page. I’m very risk-averse, my firm is very risk-averse, so we get engagement letters for everything. So, that’s what we’re doing for helping prepare the applications. We haven’t submitted any applications on behalf of any of our clients yet; they haven’t asked us to do that. Our attest clients I don’t think would ask us to do that; it would be more our nonattest clients or very small clients that would, but they still haven’t asked us to do that on the application side.

Lee-Andrews: Sure. As part of the Ethics Division, we have a hotline where practitioners can call in and ask questions or go over a certain situation or a scenario. Iryna, have we had any calls with relation to the application process for these loans?

Klepcha: Actually, in addition to what Kelly has mentioned, I wanted to highlight two points, based on some of the questions that I have been hearing from our members. The first point is that signing the application as a client’s authorized representative will impair independence, because you have accepted the ability to exercise authority on behalf of a client. And so, if you do decide to sign the application, before you do that, we recommend you consult with your professional liability carrier or legal counsel, so you can understand all the legal implications. The second point is, if you obtain a PPP loan from a lender that is an existing attest client, independence will be impaired. So, Toni, these are the two points that I wanted to point out to the listeners.

Lee-Andrews: Thanks, Iryna. Let’s talk about forgiveness applications. I know that several lending institutions are accepting the forgiveness applications, and that’s been going on for a bit of time now. And I’ve also heard that other lending institutions have kind of put their forgiveness application process on hold, waiting for additional guidance from the SBA. Kelly, let us know what you’re hearing on that front.

Hunter: We have a mixed bag, as well. So, we have some clients that their banks have put everyone on hold, and so they’re not even accepting the applications for forgiveness. The client has completed them and is just waiting to submit. And then, we have others who have already submitted, and I actually finally had my first client that I got an SBA letter that it had been forgiven. So that was the first one I have seen.

Lee-Andrews: Exciting, right?

Hunter: It was exciting. I was, like, “You’re the first one.” They were, like, “Wow, I couldn’t believe it.” That’s where we’re really getting most of the work from our clients is helping them with the forgiveness, because obviously that’s the most important part, getting it forgiven. So, they’re asking us to come in and look at their application for forgiveness again, go through their numbers, help them with the full-time equivalent calculation, help them with their payroll cost calculation, those types of things. And again, I get an engagement letter for that. And just a shoutout to the AICPA, there’s resources on the AICPA website, and CNA put together a really good template for engagement letters for forgiveness application and for the actual application. So, I would recommend going and searching those and finding those.

But again, we get an engagement letter for those, to make sure that we’re going to keep our independence for those attest clients and that they accept their responsibilities. One thing I’d like to talk about is, on the nonattest clients, we can do everything for them, obviously; we don’t have to follow those safeguards. But I would recommend that you don’t impair independence if you don’t have to. That’s very important. Because as CPAs, we want to do everything we can for the clients, and that’s what we do, we have their interest at heart, but if there is no need to impair independence, don’t impair independence. But there are some clients that were too far down that road that we’ve done everything for them from the beginning, and so you could do the whole application for forgiveness, submit it and everything. But as Iryna said, I would check with your professional liability insurance carrier before you do anything like that.

But I would just caution you to pause before you go down a road of accepting management responsibility when you don’t need to. But that’s what we’re doing for applications for forgiveness. We have had some that have said, “We don’t know how to do any of this,” and so, we have actually had to do everything for them, and there is a portal — their bank has a portal, and we’ve actually submitted it through their portal for them. They’ve signed the engagement letter saying they’ve accepted responsibility and authorized us to do that. But then, there are other clients that just want us to look over the application as one final set of eyes, but I still get an engagement letter for that.

Lee-Andrews: Good advice, for sure. What I’m hearing, and I think what we’ve noted, is, like you said, a mixed bag, it’s just a lot of different ways to submit that forgiveness package. And in the AICPA guidance, we’ve got three scenarios where we talk about the member helping to submit that forgiveness package. And one of those, Kelly, as you mentioned, I think that was the first one you mentioned, was that the member sends the forgiveness package to you, to look over, and so forth.

Hunter: Right.

Lee-Andrews: And then, are you seeing situations where, at that point, the client is submitting the package? Or —

Hunter: Yes, that’s exactly what it is, they send it to us just to review, we say, “Yes, it looks great,” and if we have any questions, we ask those questions. But then, they, ultimately, do the submission themselves, in that first scenario, yes.

Lee-Andrews: OK. And then, another scenario would be where, like you said, the [client] says, “Really don’t know how to do any of this. How can you help me? What can you do?” So, they send you the information, and you’re preparing the forgiveness application.

Hunter: Correct, yeah, we do everything. But we still have them look it over, because no one knows their business better than them, you know, so they look it over and make sure it makes sense. But we help with the expertise of the actual application, yes.

Lee-Andrews: Sure, OK. Iryna, again, back to the hotline, what are the questions we’re getting on forgiveness applications?

Klepcha: So, we’ve heard a lot of discussion, a lot of questions about, “What can I do when I assist my client with the forgiveness package application? How far can I go? What can I do? And as it relates to nonattest services, what do I need to look out for?” And you’ve mentioned various scenarios, how the application can be submitted to the lender, and what services could be provided by the CPA firm, by the member. If the member wants to maintain independence, they must meet the general requirements for performing nonattest services, including the client is willing and able to accept responsibility for the services provided. And also, Kelly mentioned using a portal now for submitting applications.

So, if your portal or platform or tool is being utilized, you must meet the hosting requirements, specifically avoiding taking custody of or storing a client’s data or records, so that the data or records are only available to your client from you. So, those are the main two points that I wanted to highlight.

Lee-Andrews: Definitely, the nonattest services, as Iryna mentioned, and, Kelly, you talked about having the client look over that forgiveness application, if it’s one of those scenarios in which the CPA is preparing the application. Having the client look over that application and making sure that there is somebody with the suitable skills, knowledge, and experience, of course, that is willing and able to accept that responsibility. And then, Iryna mentioned hosting because we have that portal. As I mentioned in the beginning, the initial guidance was developed pre-portal, so, now we have the portals, which have come into play, and members need to make sure that they are in compliance with our hosting service’s independence requirements.

So, Kelly, Iryna, 2020 was a very, very challenging year. I imagine, Kelly, in your practice, it was something new every day, right?

Hunter: It was, yes, every day, you didn’t know what was gonna happen next, but we’ve gotten through it.

Lee-Andrews: Good, good. And 2021 has started out with, again, a lot of changes and a lot of things going on, and now tax season is in the mix as well.

Hunter: Right.

Lee-Andrews: Well, Kelly, Iryna, any last thoughts you want to leave for our listeners?

Hunter: Just the thought that I’d like to leave is what I just touched on earlier. Independence is such an important thing, and I would just caution you and urge you not to impair independence if you don’t have to. Because once you’ve impaired it, you cannot get it back. So, I would just say that, just make sure you assist your client as you can, as best you can, but try to maintain that independence if you at all possible can.

Klepcha: The main point I would like to make is, familiarize yourself with the nonattest service guidance. Empower yourself if you encounter situations where the code does not specifically address the situation, go back to the basics of the nonattest service. Ask yourself, “Would the service that’s being requested require you to perform a management responsibility? Does my client have someone with the appropriate skills, knowledge, or experience to oversee the service? Have I documented what the services will be, what the objectives are, and whether the client accepted its responsibilities?” Really go back to the basics of the nonattest services subsection, and if that doesn’t get you where you need to be, then, go to the conceptual framework.

Lee-Andrews: Good advice, good information. Iryna, Kelly, I really appreciate you joining me today. I’d like to close with thanks to the Journal of Accountancy for giving us this guest spot today. And to all of you for listening. For more ethics episodes, you can go to aicpa.org/ethicallyspeaking. That’s the podcast of the AICPA Ethics Division, and you’ll find a lot of great enrichment material there. Also, check the show notes page of this episode for more resources.