Professional Ethics Executive Committee adds interpretive guidance for independence and integrity rules

The AICPA’s Professional Ethics Executive Committee on June 23, 2017, issued interpretations for its independence and integrity rules and updated an interpretation for the integrity rule.

ET Section 1.400.205, “Hosting Services,” which falls under ET Section 1.200.001, “Independence Rule,” outlines the types of data or technological services an accountant provides to a client that will impair the accountant’s independence from the client. According to the interpretation, if an accountant hosts the client’s website or other nonfinancial system, keeps the client’s general ledger information or legal documents, or provides disaster recovery or backup services, the accountant’s independence will be weakened.

The interpretive guidance says it is generally acceptable for an accountant to run computer applications that are intended to support the attest services that are being provided to the client.

The interpretation becomes effective on Sept. 1, 2018.

ET Section 2.140.010, “Pressure to Breach the Rules,” is part of ET Section 2.100.001, “Integrity and Objectivity Rule,” describes the pressures or conflicts of interest that could cause an accountant to breach the ethics guidance. The interpretation says that family members bidding on vendor contracts with the client could undermine an accountant’s independence. In addition, the pressure could come from other interested parties who want the financial statements to report financial data that will look good to investors, analysts, and lenders or to otherwise misrepresent the client’s financial information. In other instances, superiors may ask accountants to inflate their expense reports or cut back on the work required for the audit. The interpretation also discusses the actions an accountant can take to lessen the pressure.

The interpretive guidance becomes effective on Aug. 31, 2017.

Revised Interpretation ET Section 2.130.010, “Knowing Misrepresentations in the Preparation and Presentation of Information,” also falls under ET Section 2.100.001, and it describes who is responsible for preparing the financial information, the intended readers of the information and an accountant’s responsibility for the information’s accuracy.

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