Audit Conduct

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PEEC Open Meeting Highlights (Nov 2018)

The AICPA Professional Ethics Executive Committee (PEEC) held an open meeting on November 7- 8, 2018 in Durham, North Carolina. Highlights from the discussion follow (full version available for download below): 

  • LEASES (Independence): Task Force Chair Lisa Snyder reviewed the revised language in the proposal issued in October 2017, which describes the types of leasing relationships that impair (or may impair) independence. After discussion, which included clarification of what is meant by evaluating leases "in the aggregate" and subsequent revision to the proposal, the PEEC unanimously agreed to issue the proposed interpretation, as revised, as a final standard.
  • STAFF AUGMENTATION (Independence): Task Force Chair Lisa Snyder described the changes to a proposal to allow firms to lend staff to attest clients to perform certain services under the client’s supervision when certain safeguards are met. The PEEC raised concerns about describing the duration of such an engagement as "limited" or "temporary" vs. "short," which is used in the international "IESBA" code, and agreed to include the latter term in the proposal. PEEC members representing state accountancy boards raised concerns about the proposed services in the small firm/client environment where it would be difficult to apply adequate safeguards, but agreed to vote for the proposal in the interest of obtaining feedback from the membership and others. After discussion and subsequent revisions to the proposal, the PEEC unanimously agreed to issue the proposed interpretation, as revised, for member comment.
  • TAX PRACTICE QUALITY REVIEW PROPOSAL (Confidential Client Information): AICPA staff Brandon Mercer discussed the revisions made to the June 2018 proposal that would allow members undergoing tax practice quality reviews to disclose client data to a reviewer without obtaining explicit permission from the client. The PEEC discussed, but did not agree, to include a statement that the member be satisfied that the reviewer is aware of relevant treasury regulations and/or have a confidentiality agreement when the reviewer is not an AICPA member because professionals performing those reviews are subject to Circular 230 confidentiality rules and US Treasury (IRS) regulation 7216.The PEEC unanimously agreed to adopt the proposed interpretation, as revised, effective on the last day of the month the interpretation is published in the Journal of Accountancy.
  • HOSTING FAQs (Independence): Task Force Member Nancy Miller reported on the task force’s deliberations regarding whether the draft frequently-asked-questions (FAQs) on hosting services are consistent with the hosting services interpretation (adopted last year but subject to a deferred effective date until 7.1.19). The PEEC discussed General Ledger services and services involving use of a member's portal. The PEEC also discussed concerns raised by AICPA staff Jim Brackens about preliminary results from a survey of firms conducted by the AICPA’s Private Companies Practice Section (PCPS). The PEEC agreed to ask the task force to review the hosting FAQs in light of the discussion and to also share revised FAQs with the AICPA Technical Issues Committee for their input before presenting them to the PEEC at its February 2019 meeting.  
  • INFORMATION SYSTEM SERVICES PROPOSAL (Independence): Ms. Miller noted that the task force has begun clarifying the March 2018 proposal to make it more understandable and help guard against obsolescence due to the rapid changes in technology. The task force will continue to review the comment letters, rework the draft proposal and report back to the PEEC in February 2019.
  • NOCLAR TASK FORCE UPDATE (Integrity and Objectivity):  Task Force Chair Bob Denham provided an update on this task force's activities, saying the task force is continuing to meet but does not yet have a proposal for the PEEC regarding the March 2017 exposure draft. Recently, the AICPA Staff and Mr. Denham met with the AICPA/NASBA Uniform Accountancy Act (UAA) committee along with the IESBA chair and senior staff who presented information on the Board’s development of the NOCLAR standard. He noted that the NOCLAR task force is being expanded to include additional AICPA and NASBA members (including the UAA co-chairs). He believes this will help streamline the process.
  • EXTERNAL DIRECTORS TASK FORCE (Independence): Task force chair Bill McKeown asked for the PEEC’s feedback on two issues related to independence considerations for firms adding external directors to their firms' management boards. After discussion, it was agreed that the task force will circulate guidance before bringing the matter back to the PEEC at the February 2019 meeting.
  • STATE AND LOCAL GOVERNMENT (SLG) AFFILIATE PROPOSAL (Independence): Ms. Miller, the task force chair, discussed the latest revisions to the July 2017 ED that defines the affiliates of a SLG for purposes of independence. Members agreed with changes to the guidance on "upstream" affiliates of an SLG audit client. After discussion, the PEEC agreed to re-expose the revised, proposed interpretation for a 60-day comment period.

NEXT MEETING:

The next open PEEC meeting will be held February 12-13, 2019 in New Orleans, LA.