AICPA Proposes Changes to State & Local Government Entities Affiliate Independence Rule

JULY 10, 2017   RECENT DEVELOPMENTS

The AICPA's Professional Ethics Executive Committee (PEEC) issued an Exposure Draft on July 7, which resulted from the PEEC's revision of “Entities Included in State and Local Government Financial Statements,” the independence interpretation that determines when a member needs to be independent of a state or local governmental (SLG) entity that is related to his or her financial statement attest client.   Although the Code includes a “Client Affiliates” interpretation (ET sec. 1.224.010) that is applicable to commercial entities, the PEEC does not believe that interpretation effectively identifies relationships requiring independence in the SLG sector because of the fundamental differences between the two sectors. (The goal however was to be conceptually consistent with the underlying independence principles, unless there was a compelling reason to differ.)  

Comments are due October 16, 2017.