AICPA Proposes Revisions to Code of Professional Conduct Definitions of "Client" and "Attest Client"

Today, the AICPA's Professional Ethics Executive Committee ("PEEC") proposed revised definitions of CLIENT and ATTEST CLIENT, along with related definitions, interpretations and guidance.  Comments on the proposed changes are due May 15, 2017. 

The proposal clarifies the existing definitions of CLIENT and ATTEST CLIENT, relocates guidance for government auditors in today's CLIENT definition to a more appropriate location in the Code, and answers the following questions when one entity engages the member to perform services on another entity -- 

(1) Of which entity is the member required to be independent? (See Independence below)

(2) To which entity does the member owe a duty of confidentiality? (See Confidentiality below)

(3) To whom may the member respond to requests for records and work product? (See Records Requests below)

At its core, the proposal defines CLIENT as the entity engaging the member AND the entity that is subject to the member's services.  If these are different persons or entities, the member has two separate clients for the engagement.


ATTEST CLIENT includes the latter category of CLIENT only, that is, the person or entity that is subject to the attest services.  Thus, the member needn't be independent of the engaging entity (if it is not also the "subject entity") unless the engaging entity is caught by the affiliate interpretation (ET 1.224.010), e.g., is the attest client's parent entity and the attest client is material to the parent.  In addition, the engaging party should consider whether conflicts of interest exist under the circumstances.


The proposal is premised on the principal that the member owes the duty of confidentiality to the beneficiary of the services. So, if a company ("engaging entity") hires a member to perform personal tax services for the company's executives ("subject entities" and beneficiaries), the member should not disclose information obtained during the tax engagement to the company without first obtaining the executive's permission to do so. 

When the engaging party benefits from the services, the PEEC presumed that the engaging entity and subject entity would typically have an agreement in place to share engagement-related information with each other, i.e., the member would not need to obtain the subject entity's permission to disclose the results of the services and other relevant information to the engaging entity. The example provided in the proposal was that Company A engages the member to value certain assets of Company B for A's possible acquisition.

Records Requests

For client-provided records, the PEEC proposed the member should return those records to the party who provided them to the member. 

For the member's work product, the member should provide that information to the beneficiary of the engagement (similar to the confidentiality rule) unless the member made other arrangements with the client.  Using the previous examples: 

  • A member hired to perform personal tax services for company executives (beneficiaries) should provide the work product (tax returns) to the executives, not the company that engaged the member. 
  • A member hired to value Company B's assets for Company A's possible acquisition should provide the work product to Company A (beneficiary), unless the parties came to some other agreement.