On September 15, 2023, the AICPA’s Professional Ethics Executive Committee (PEEC or Committee) released New and Revised Interpretations Related to Fees to the Independence Rule of the AICPA Code of Professional Conduct (the Code). The additions and revisions will be effective on January 1, 2025. Early adoption is permitted and non-authoritative guidance is expected later this year or early in 2024.

This article discusses the background and key elements of the new and revised interpretations.


The AICPA and other accounting standard-setting bodies around the world are members of the International Federation of Accountants (IFAC). Among other things, IFAC members agree to adopt standards that are at least as strict as the International Code of Ethics for Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA or Board). Members of the IFAC Forum of Firms, generally firms that audit large numbers of multinational companies, agree to apply the IESBA Code as a condition of membership.

In April 2021, the IESBA released Revisions to the Fee-related Provisions of the Code, which strengthened its independence requirements in certain situations involving fees. PEEC appointed a task force to study the issue and report back to the committee. After much research and deliberation, and approval by PEEC, on March 15, 2023, the committee released an Exposure Draft entitled, Proposed new and revised interpretations related to fees. Based on a review of the comment letters, and subsequent editing to address the comments, PEEC adopted two (2) new interpretations and two (2) revised interpretations of the “Independence Rule” (ET sec. 1.200.001).

New Interpretations:

“Determining Fees for an Attest Engagement” interpretation (ET sec. 1.230.030)

“Fee Dependency” interpretation (ET sec. 1.230.040)

Revised Interpretations:

“Conceptual Framework for Independence” interpretation (ET sec. 1.210.010)

“Client Affiliates” interpretation (ET sec. 1.224.010)

Determining Fees for an Attest Engagement

The first new interpretation addresses fees charged for an audit or other attest engagement. The gist is this: if a covered member responsible for determining an attest engagement fee allows the provision of other services to unduly influence the firm’s fee for the attest services, self-interest and undue influence threats to independence would not be at an acceptable level. Those threats are described as follows:

Self-interest threat – the threat that a member could benefit, financially or otherwise, from an interest in, or relationship with, an attest client or persons associated with the attest client.  

Undue influence threat – the threat that a member will subordinate his or her judgment to that of an individual associated with an attest client or any relevant third party due to that individual’s reputation or expertise, aggressive or dominant personality, or attempts to coerce or exercise excessive influence over the member.

In such cases, the firm could not apply safeguards to reduce threats to an acceptable level and independence would be impaired.    

A few things to keep in mind when applying this rule. First, the interpretation recognizes that firms have a right to make decisions as to what fee to charge, based on specific facts and circumstances that are relevant to the engagement, such as technical and professional standards, market conditions, etc. Further, a covered member may consider any cost savings achieved as a result of the experience that the firm derives from providing tax, advisory, or other services to the client. For example, a firm providing tax compliance, internal audit assistance, and system and organization controls (SOC) attestation services to an audit client would likely have a deeper, more thorough knowledge of the client’s business than a firm that provides only audit services. Such knowledge may result in efficiencies that allow the firm to charge a lower fee for the attest engagement.

Fee Dependency

Currently, the AICPA Code does not explicitly require members to consider whether the amount of fees collected from a single attest client creates a dependency or excessive reliance on such fees. The new interpretation, which is principles-based, requires significant judgment in determining whether total, annual fees from an attest client firm represent a “large proportion” of the firm’s total fees. No numerical gauge (such as a certain percentage of the firm’s total fees) defines what constitutes a large proportion – it is a matter of professional judgment. When this condition is met, self-interest and undue influence threats to the firm’s independence are at an unacceptable level due to the actual and/or perceived dependence on the fees generated by that client. In such cases, the covered member should evaluate the threat(s) using the Conceptual Framework for Independence, and if significant, apply safeguards (if possible) to reduce the threat(s) to an acceptable level.  

The Calculation

When calculating the firm’s total fees from an attest client, the covered member:

● should include all fees from attest and nonattest services for the year (if appropriate, the covered member can consider prior year financial information);

● may exclude services performed by other network firms in the firm’s network; and

● if the attest client is a financial statement attest client, e.g., a financial statement audit or review, the covered member should include fees from entities the attest client can control as described in item (a) of the definition of Affiliate (ET section 0.400.01).

Firms should perform this calculation each year as part of their independence evaluations.

Five (5) Consecutive Years

When, for each of five (5) consecutive years, total fees from an attest client are or are likely to be a large proportion of the total fees received by the firm, the firm must apply one of the following safeguards:

Perform a pre-issuance review. Prior to the attest report being issued for the fifth year, an appropriate reviewer who is not a member of the firm issuing the report (“independent reviewer”) reviews the fifth year’s attest work.

Perform a post-issuance review. After the attest report on the fifth year has been issued, and before the attest report is issued on the sixth year’s attest engagement, an independent reviewer reviews the fifth year’s attest work.

If total fees continue to represent a large proportion of the firm’s fees, the firm shall continue to apply one of the safeguards, i.e., pre- or post-issuance review, each year.

If two (2) or more firms are engaged to conduct an attest engagement and one firm is required to apply one of the prescribed safeguards, the other firm’s involvement may serve as an independent (pre-issuance) review for the other firm. However, this is only the case if each firm is able to take responsibility for the attest report.

Revised Interpretations

In light of the new Fee Dependency Interpretation, the PEEC also revised the following independence interpretations:

Conceptual Framework for Independence

To conform the Conceptual Framework for Independence to the new interpretation, the PEEC revised the framework, specifically by amending an example under the self-interest threat (ET sec. 1.210.010 par. .16(c)) and adding a new example under the undue influence threat (ET sec. 1.210.010 par. .18(d)).

Client Affiliates

The PEEC added a provision to the Client Affiliates Interpretation (1.224.010), which reads as follows:

For purposes of applying the “Fee Dependency” interpretation [1.230.040], fees from entities described under items (b)–(l) of the definition of affiliate are not required to be included when calculating the total fees generated from a financial statement attest client. When the covered member knows, or has reason to believe, that a relationship or circumstance involving any of the entities described under items (b)–(l) of the definition of affiliate is relevant to the evaluation of a fee dependency, the covered member shall include that affiliate when identifying, evaluating, and addressing threats related to fee dependency.

Therefore, only the fees from services the firm provided (or will provide) during the year to entities that the attest client controls must be included in the annual fee calculation. However, if the covered member identifies a relationship or circumstance involving another type of affiliate (e.g., a sponsored employee benefit plan) that is relevant to the covered member’s evaluation, the covered member should also include fees the firm will or has received from that affiliate.  


To meet its convergence obligations as an IFAC member, the AICPA’s PEEC adopted new and revised independence interpretations related to an attest firm’s fees. The new interpretations will require firms to consider whether the provision of other services to an attest client unduly influenced the firm’s fee for attest services. Firms will also need to consider whether total fees received (or to be received) from an attest client for the year represent a large proportion of the firm’s total fees. Where a fee dependency exists for more than five (5) consecutive years, firms will be required to apply specific safeguards to reduce threats to independence to an acceptable level.

Note: I am a member of the Professional Ethics Executive Committee,which is responsible for interpreting and enforcing the AICPA Code of Professional Conduct, for promulgating new interpretations and rulings, and for monitoring those rules and making revisions as needed. All views expressed in this article are my own and do not represent official positions of either PEEC or the AICPA.

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