The following is a quick recap on the open meeting of the Professional Ethics Executive Committee (PEEC) held virtually on May 9-10:
The PEEC Chairman announced that he and another member of PEEC are finishing their terms on the Committee and that four (4) new members will join the PEEC at its August 2023 meeting.
The chair of the Public Interest Entity Task Force reviewed changes to the proposed exposure draft (ED) to adopt a new definition of "publicly traded entity" and revise the definition of "public interest entity" (PIE), which would incorporate a new compliance requirement. Changes included:
- Revising the insurer category to only include entities that are subject to additional regulations under the Model Audit Rule (MAR) because they issue policies with premiums exceeding $1B (previous proposed threshold was MAR insurers with premiums of $500M).
- Revising the investment company category to only include entities subject to the federal Investment Company Act of 1940.
- Eliminating employee benefit plans receiving Form 11K audits, as the sponsors of those plans are already included as publicly traded entities.
- Eliminating the “catch-all” category, which will allow PEEC to determine on a go-forward basis whether to add categories to the definition of PIE.
The PEEC also agreed to revise the category of financial institutions subject to the federal “FDICIA” law to raise the threshold to $1B from $500M, similar to the change made for insurers. The task force will also add a question regarding the threshold. PEEC also discussed whether credit unions, whose memberships often allow public participation, should also be considered PIEs if they exceed certain thresholds. (Currently, credit unions are only subject to the AICPA independence rules although they are regulated entities.) The task force will add another question about credit unions.
PEEC also discussed whether entities that issue municipal securities should be considered PIEs. PEEC members expressed various opinions for and against including these entities and agreed to allow the exposure process to gather more views.
After agreeing to the changes, the PEEC voted to issue the exposure draft, which the task force will revised per the committee’s directions. Comments on the ED will be due on 9/15/23, allowing for an approximately 90 day comment period.
The chair and staff of the Simultaneous Employment Task Force provided an update on activities; primarily, development of a preliminary framework to assess restrictions; internal and external outreach (e.g., AICPA expert panels, NASBA ethics committee), and proposed plans to issue a survey and conduct roundtable discussions to gather feedback. PEEC did not object to any of these activities.
PEEC agreed that the Private Equity Investments in Firms Task Force’s charge will be to assess the current AICPA Code provisions to determine whether they provide sufficient direction and guidance to firms engaging in such transactions. Provisions the task force will examine in light of information gathered from firms will be Alternative Practice Structures (Independence Rule), the Form of Organization and Name Rule, and Appendix B of the Code.
PEEC discussed the proposed Strategy and Work Plan of the International Ethics Standards Board for Accountants (IESBA). The task force examining the proposal generally supported the plan but raised the following concerns: (i) the rapid pace of change to the IESBA Code, making implementation challenging; (ii) the Code becoming more rules-based than principles-based; and (iii) IESBA’s intention to develop “professional agnostic” rules in its Sustainability project that would apply to professionals performing services outside the accounting profession. PEEC was generally agreeable with the task force’s direction.
SSAE Engagements Task Force staff described a proposed nine-part charge that would allow the task force to thoroughly explore relevant matters pertaining to independence under ET section 1.297 when a member performs attest services in accordance with the Statements on Standards for Attestation Engagements (SSAEs). PEEC did not object to the proposed charge.
AICPA staff provided an update on upcoming standard-setting projects to begin this year, which include:
- Nonattest services – tax (IESBA convergence)
- Nonattest services – legal (IESBA convergence)
- Nonattest services – general (IESBA convergence)
- Reporting an independence breach
- Digital assets
- Artificial intelligence
- Business relationships
- 529 plans
Potential projects include Engagement Team/Group Audits; Technology; and Quality Management (conforming changes), which are all possible IESBA convergence projects.
AICPA staff provided an overview of the IESBA ED on Tax Planning Services and issues the committee drafting the letter have identified, which include (among other things) concerns about the stand-back test, a professional accountant’s responsibility when referring clients to another’s product or service, the definition of tax planning services, and identification of ultimate beneficiaries.
PEEC heard a presentation about digital assets.
For a 20-minute update from the AICPA staff in an audio format, click here.