How does adoption of Interpretation 101-17 affect firms? [I believe Wes asked to make some introductory remarks on this as to practical experience preparing for the standard]What does a common brand name mean? [Iowa State UAA Comment]Can you discuss/clarify for us the difference between an association and a network firm? [N. Carolina UAA Comment]Would a firm be considered part of a network if it belongs to an association and includes the association’s name as only part of its firm name? Would a firm be considered part of a network if it belongs to an association and includes reference to its membership in the association on its stationery and promotional materials?Hypothethical:A CPA firm joins an association and is considered to be a network firm because one or more of the six characteristics of a network exists. Would a separate bookkeeping or consulting company owned by the CPA firm also be considered a network firm?What interests and relationships is a network firm prohibited from having with the attest clients of other network firms?How would the provision of nonattest services to a financial statement audit or review client of a network firm impact independence? Does the interpretation impact compilations or other attestation engagements, valuation, SAS 70, etc?
How does the UAA proposed definition of network firms compare to ET 101-17? Are there differences?
What about fictitious names – didn’t is that currently a prohibition in the UAA?
This is the #1 area of complaints that state boards get.Where is the PEEC task Force going with this do you think it will make a difference? Why not just adopt the UAA guidance into the AICPA Code of Conduct and sync up the two documents?Gaylen will make a comment on the very last bullet related to Colorado new rules that clarify that the CPAs “owns” its reports not the client.
Alan Steiger (Oregon) is Task Force Chair.Why all this sudden emphasis on CPAs in Business & Industry? Is it needed?Can we have dual lives? Can a CPA be in public practice and B&I at the same time? What about the reverse?
This is a case where a standard applies to all CPAs – and restricts what proprietary information a CPA can use. What does proprietary information mean?
Here are some exceptions – why are they needed? [Balance the public interest between confidentiality and transparency]
Do you think this might help boards in its consideration of “holding out”?
A Peek at PEEC - Gaylen Hansen, Lisa Snyder, Wes Williams - Friday - Regionals 2011
A Peek at PEEC(AICPA Professional Ethics Executive Cmte)<br />2011 Regional Meetings<br />June 10 – Omaha, NE<br />June 24 – Point Clear, AL<br />1<br />
Wes Williams, PEEC Chair<br />Lisa Snyder, Director of AICPA Ethics Division<br />Gaylen Hansen, Moderator and Member of PEEC<br />2<br />Panel Discussion<br />
Discussion Topics <br />Network Firms in Practice<br />CPA Firm Name Issues<br />On the Drawing Board<br />Client Records<br />Business & Industry<br />3<br />
Network Firm CriteriaET 101-17<br />If a firm “cooperates” as part of an association, and <br />Shares at least one of the following with other firms<br />Common brand name<br />Common control<br />Profits or costs<br />Common business strategy<br />Significant professional resources<br />Common QC policies & procedures<br />4<br />If one or more criteria are met, the firm is considered a “network firm” and needs to be independent of F/S audit and review clients of other network firms in the network. <br />
UAA Exposure DraftCPA Firm Names<br />Network is an association of at least 2 or more entities that: <br /><ul><li>Cooperates pursuant to agreement for purpose of enhancing capabilities to provide professional services, and;
Shares one or more of the following: </li></ul>Use of a common brand name<br />Common control<br />Profits or costs<br />Common business strategy<br />Significant part of professional resources<br />Common quality control policies and procedures<br />5<br />A “Network Firm” is a CPA firm that is part of a Network as defined above. UAA definition is the same as AICPA / ET 101-17 definition.<br />
UAA Exposure DraftCPA Firm Names<br />Firm names that are not considered misleading includes<br />Use of a common brand name as part offirm name if firm is a “Network Firm” as defined <br />Network Name as the firm name, provided it is a Network Firm and shares one or more of other characteristics in network definition (i.e., other than common brand name)<br /><ul><li>Use of CPA title when all named individuals are CPAs and are owners or former owners
A non-CPA owner in name if CPA title is not used </li></ul>6<br />
UAA Exposure DraftCPA Firm Names<br />Firm names that are considered misleading includes –<br />Individual in name who is not a CPA if “CPAs” is used<br />Indicating association with persons who are not members of firm (except as permitted under Network Firm provision)<br />Use of “& Company” or “& Associate” if firm does have, in addition to named partner/owner at least one other unnamed partner/owner or employee<br /><ul><li>Name of an owner whose license is revoked for disciplinary reasons by State Board
Any representation that would likely cause a reasonable person to have a false/unjustified expectation of favorable results or capabilities </li></ul>7<br />
Retention of Client RecordsET 501-1<br />Recent editorial revision of “client records”<br />Client provided records are accounting or other records belonging to client provided by or on behalf of the client,including reproductions of such records<br />Task Force recommending<br />Highlight state boards’ more restrictive rules on unpaid fees<br />Guidance on how to treat electronic records<br />Guidance on “CPA work product” (e.g., accountant’s reports)<br />8<br />
Definition: Member in Business & IndustryET 92<br />A member employed or engaged on a contractual basis or volunteer basis in an executive, staff, or administrative capacity in such areas as industry, the public sector, education, the not-for-profit sector, regulatory bodies, or professional bodies. This does not include members while engaged in the practice of public accounting.<br />Allows for the fact that CPA in public practice may simultaneously also be a engaged in B&I (e.g., serve as a volunteer board member)<br />
Confidential Employment Information ET 501-9<br />Applies to all members/CPAs<br />Covers confidential information of current or prior employer (includes volunteer activities)<br /><ul><li>Proprietary information outside public domain and obtained as result of employment relationship
Act discreditable if used without employer consent unless legal or professional responsibility exists</li></ul>Not intended to prohibit member from using expertise gained through prior employment relationships.<br />
Confidential Employment Information ET 501-9<br />Exceptions for disclosure<br />Complaints with disciplinary or regulatory body<br />Protect interests in legal proceedings<br />Report concerns on employer’s confidential complaint hotline or to those charged with governance<br />Obtain financing with lenders; deal with vendors, clients, customers, etc. on behalf of employer<br />
Financial interestsET 501-10<br />Threats to integrity and objectivity of CPA in B&I or their immediate/close family member’s financial interest in or other relationship with employer, e.g.<br />A financial interest in employer and value directly affected by decisions of CPA<br />Eligibility for profit/performance-related bonus and value directly affected by decisions of CPA<br />Qualifying for share options if certain targets are achieved<br />Does not prohibit CPAs in B&I from having financial interests in employer.<br />
Financial interestsET 501-10<br />Significance of threat should be evaluated and safeguards applied, when appropriate and reasonable, to eliminate threat or reduce it to an acceptable level<br />Examples of safeguards include: <br />Consultation with relevant professional bodies<br />Up-to-date education on ethical issues and legal restrictions<br />In evaluating significance of threat, nature and significance of financial interest should be evaluated.<br />
Financial interestsET 501-10<br />Examples of safeguards include (cont’d): <br />Policies and procedures for committee independent of CPA to determine level or form of remuneration<br />Consultation with superiors / those charged with governance<br />Disclosure of relevant interests and plans to trade shares<br />Internal and external audit procedures<br />Current knowledge of regulations, e.g., insider trading<br />In evaluating significance of threat, nature and significance of financial interest should be evaluated.<br />
Deceptive Acts in Promoting or Marketing ET 501-11<br />If CPA in B&I promotes/markets abilities to provide professional services or makes claims about experience or qualifications in false, misleading, or deceptive manner = Act Discreditable <br />Includes claims/representations that would cause a reasonable person to misunderstand/be deceived<br />Includes representation about CPA licensure or other professional certification or accreditation<br />15<br />