Transcript AICPA Profesional Ethics Codification Project PowerPoint

AICPA
Ethics Codification Project
As of January 24, 2014
Project Objective
Create user friendly, intuitively arranged Code
Revise without making significant changes to
existing requirements and restrictions
• Clarity through better drafting conventions
• Substantive changes will follow due process
Incorporate conceptual framework approach
• Incorporate threats and safeguards
• Conceptual framework only applies when no guidance
in Code exists
• Cannot be used to override existing requirements
Project Objective cont.
Incorporate references to division’s nonauthoritative
guidance
Physically different – Separate parts
- Part 1: Members in public practice
- Part 2: Members in business
- Part 3: All Other Members
On-line Codification with enhanced functionality
Project Page on aicpa.org. Contains information such as:
• Mapping Documents
• Informational Video and articles
• Project Timeline
• Drafting Guidelines
www.aicpa.org/InterestAreas/ProfessionalEthics/Community/Pages/
aicpa-ethics-codification-project.aspx
Substantive Changes
AICPA Ethics Codification
Incorporate Conceptual Frameworks
Two New Frameworks
• Conceptual Framework for Members in the Practice of Public
Accounting
• Conceptual Framework for Members in Business
Applied when no guidance on a particular relationship
or circumstance
Violation of applicable Rule
• If the member cannot demonstrate that safeguards were applied
that eliminated or reduced significant threats to an acceptable level
Other Substantive Changes
Ethical Conflicts
Definition of Attest Client
Loans and Lending Institutions
Blind Trusts
Expanded Application
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Self-Review Treat
Director Positions
False, Misleading or Deceptive Acts
Billing for a Subcontractor's Services
Attest Engagement Performed with Former Partner
Use of AICPA Awarded Designation
What is a Conceptual Framework
Nothing on Point in the Code
• Old Thinking
 Relationship or circumstance must be permitted
• Revised Thinking
 Apply the conceptual framework
Requires professional judgment
• Reasonable Third Party
- For example, if the situation involves a staff person often an
effective safeguard is:
- The staff's removal from the engagement
- Additional review of the staff’s work
Steps of the Conceptual Framework
Step 1
Identify
Threats
No
Threats
Proceed
Step 2
Evaluate
Threats
Threats not
Significant
Proceed
Threats
Not Acceptable
Level…Stop
Step 3
Identify
Safeguards
Existing
New
Step 4 Evaluate
Safeguards
Threats at
Acceptable
Proceed
Conceptual Framework - Case Study
Characters
• Anthony “Auto” – Owner of Used Car Dealership
• Evan – Owner of a CPA Firm (and Thomas’ brother)
• Robert – Owner of Auto Supply Store and über mechanic
(childhood friend of Auto and Evan)
Situation
• Can Evan perform reviews for Robert’s store?
Polling Question: Conceptual
Framework
When using the conceptual framework, if
a threat is significant you should:
A. Not perform the attest engagement
B. Discuss the threat with those charged with
governance
C. Apply safeguards that eliminate or reduce the
threat to an acceptable level
D. Adopt policies and procedures that are
designed to monitor the quality control of the
attest engagement
Polling Question: Safeguards
If Evan implemented the same
safeguards, could he perform an annual
review for Auto’s used-car dealership?
A. Yes
B. No
Nonauthoritative Guidance
AICPA Ethics Codification
Nonauthoritative Guidance References
Appears in boxed text at the end of the applicable
topic, sub-topic or section. For example:
Appraisal, Valuations, and Actuarial Services for Nonfinancial Statement
Purposes
.06 Threats would be at an acceptable level, if a member provided appraisal, valuation, or actuarial
services solely for nonfinancial statement purposes, such as appraisal, valuation, and actuarial
services performed for tax planning or tax compliance, estate and gift taxation, and divorce
proceedings. Accordingly, independence would not be impaired. [Prior reference: paragraph .05 of ET
section 101]
Nonauthoritative answers to FAQs regarding appraisal, valuation, and actuarial services are available
at www.aicpa.org/InterestAreas/ProfessionalEthics/Resources/Tools/
DownloadableDocuments/NonattestServicesFAQs.doc
Visual Example
AICPA Ethics Codification
Four Parts
Preface
0.100.000 Overview of the Code of Professional Conduct
0.200.000 Structure and Application of the AICPA Code
0.300.000 Principles of Professional Conduct
0.400.000 Definitions
0.500.000 Nonauthoritative Guidance
0.600.000 New, Revised, and Pending Interpretations and Other
Guidance
0.700.000 Deleted Interpretations and Other Guidance
Part 1
Part 2
Part 3
Part 1
Members In Public Practice - Topics
1.000 INTRODUCTION
1.100 INTEGRITY AND OBJECTIVITY
1.200 INDEPENDENCE
1.300 GENERAL STANDARDS
1.310 COMPLIANCE WITH STANDARDS
1.320 ACCOUNTING PRINCIPLES
1.400 ACTS DISCREDITABLE
1.500 FEES AND OTHER TYPES OF REMUNERATION
1.510 CONTINGENT FEES
1.520 COMMISSIONS AND REFERRAL FEES
1.600 ADVERTISING AND OTHER FORMS OF SOLICITATION
1.700 CONFIDENTIAL INFORMATION
1.800 FORM OF ORGANIZATION AND NAME
Independence Sub-Topics
1.210 Conceptual Framework
Approach
1.220 Accounting Firms
1.224 Affiliates, including
Governmental Units
1.226 Reissued Reports
1.228 Engagement Contractual Terms
1.230 Fees
1.240 Financial Interests
1.245 Trusts and Estates
1.250 Participation in Employee
Benefit Plans
1.255 Depository, Brokerage and
Other Accounts
1.257 Insurance Products
1.260 Loans, Leases, and Guarantees
1.265 Business Relationships
1.270 Family Relationships with Attest
Clients
1.275 Current Employment or Association
with an Attest Client
1.277 Former Employment or Association
with Attest Client
1.279 Considering or Subsequent
Employment or Association with
Attest Client
1.280 Memberships
1.285 Gifts and Entertainment
1.290 Actual or Threatened Litigation
1.295 Nonattest Services
1.297 Independence Standards for
Engagements Performed in
Accordance with SSAEs
Financial Interest
1.240.010 – Overview of Financial Interests
1.240.020 – Unsolicited Financial Interests
1.240.030 – Mutual Funds
1.240.040 – Retirement, Savings, Compensation, or
Similar Plans
1.240.050 – Partnerships
1.240.060 – Limited Liability Companies
1.240.070 - Section 529 Plans
Loans, Leases and Guarantees
1.260.010- Loans
1.260.020 – Loans and Leases with Lending
Institutions
1.260.030 – Servicing of a Loan
1.260.040 – Leases
1.260.050 – Association With an Entity That Has a Loan
to or From an Attest Client
Mapping Content and Citations
AICPA Ethics Codification
Mapping Document…excerpt
AICPA Ethics Codificaiton Mapping As of December 31, 2013
Extant Code Citations
New
Introduction
Title In Code
Introduction
New
New
ET section 91
New
New
New
ET section 51
ET section 52
ET section 53
ET section 54
Other Guidance
Composition, Applicability, and
Compliance
Applicability
Preamble
Article I - Responsibilities
Article II - The Public Interest
Article III - Integrity
New Citation In Code Title In Codification
0.100
Overview of the Code of Professional Conduct
0.100.010
Principles and Rules of Conduct
0.100.020
0.200.010
0.200.020.01
0.200.020.02-.05
0.200.030
0.200.040
0.200.050
0.300.010
0.300.020
0.300.030
0.300.040
Interpretations and Other Guidance
Structure of the AICPA Code
Application of the AICPA Code
Application of the AICPA Code
Citations
Transition Provisions
Drafting Conventions
Preamble
Responsibilities
The Public Interest
Integrity
http://www.aicpa.org/InterestAreas/ProfessionalEthics/Com
munity/DownloadableDocuments/Mapping.xlsx
Prior Citations in Exposure Draft
1.400.210Removing Client Files or Proprietary
Information From a Firm
.01 A member whose employment relationship is
terminated would be considered in violation of the
Acts Discreditable rule if the member takes or retains
(a) originals or copies (in any format) from the firm’s
client files or (b) proprietary information without the
firm’s permission, unless the member has a
contractual arrangement with the firm allowing such
action. [Prior reference: paragraphs .381–.382 of ET
section 591]
Framework Document…excerpt
Part 1: Members in Public Practice
000 INTRODUCTION (New Content)
• 000.010 Conceptual Framework for Members in Public Practice (New
Content)
• 000.020 Ethical Conflicts (New Content)
100 INTEGRITY AND OBJECTIVITY
100.001 “Rule 102” Integrity and Objectivity (ET§102.01)
• 100.005 Application of the Conceptual Framework for Members in
Public Practice and the Ethical Conflicts Interpretation (New Content)
110 Conflicts of Interest
• 110.010 Conflicts of Interest (ET§102.03, ER93, ET§191.186-.187,
ER 99, ET§191.198-.199, ER110, ET§191.220-.221)
• 110.020 Director Positions (ER 85, ET§191.170-.171, Substantive
Change Made)
http://www.aicpa.org/InterestAreas/ProfessionalEthics/Community/Dow
nloadableDocuments/Preliminary%20Framework%20for%20Codificati
on.pdf
Questions
Slide 24