Statements of Position

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1. The committee concluded that if a credit union meets the definition of a financial institution as provided in interpretation 101-5 and the loan is consistent with the requirements of interpretation 101-1-A4, membership in the credit union would not impair the member's and the member's firm's independence. If the credit union does not meet the definition of a financial institution or the loans or deposits are not in accordance with the interpretations and rulings of the AICPA Code of Professional Conduct, membership in the client credit union would cause the independence of the member and the member's firm to be impaired. 2. The Professional Ethics Executive Committee has been requested to provide guidance to members who question whether their independence would be considered to be impaired with respect to clients for whom the members have guaranteed loans. The committee has concluded that independence would be impaired if the guarantee exists during certain time periods specified in the ruling. 3. The Professional Ethics Executive Committee has concluded that in circumstances in which employment with a client is being offered to or sought by a member, Rule 102, "Integrity and Objectivity," is applicable. The rule requires that a member maintain objectivity and integrity when performing professional services. The committee believes that Rule 102 requires that a member remove himself or herself from the engagement in situations in which client employment is being offered or sought. 4. Rule 102, "Integrity and Objectivity," of the AICPA Code of Professional Conduct provides, in part, that in the performance of any professional services, a member "shall be free of conflicts of interest." Ethics interpretation 102-2 provides that "a conflict of interest may occur if a member performs a professional service for a client or employer and the member or his or her firm has a significant relationship with another person, entity, product, or service that could be viewed as impairing the member's objectivity." The Professional Ethics Executive Committee plans to issue ethics rulings to provide guidance on what circumstances may be viewed as creating conflicts of interest. 5. The proposed revised interpretation requires a member to return clients' records upon request whether or not the member's fees have been paid. Client records are defined as any accounting or other records belonging to the client that were provided to the member by or on behalf of the client. Workpapers are the member's property. 6. The Professional Ethics Executive Committee proposes to revise current Ethics Ruling No. 17 (ET section 191.033-.034) to indicate that an equity interest held by a member in an organization such as a country club constitutes direct financial interest that impairs a member's independence. Further, ownership of a debt interest in such entity would constitute a loan to a client that impairs independence. Membership in a club, absent an equity or debt interest, would not impair independence. 7. The Professional Ethics Executive Committee recommends the deletion of ruling no. 34 because the common trust funds of a bank are not part of the financial statements with respect to which the audit is being performed. 8. The Professional Ethics Executive Committee recommends that ruling no. 47 be deleted. Virtually all mutual funds are subject to the jurisdiction of the Securities and Exchange Commission (SEC). The SEC's rules on auditor independence differ from AICPA rules. It would therefore be misleading for this ruling to be a part of AICPA independence literature.

Publication Date

1990

Relational Format

Book

Keywords

Accountants -- Professional ethics -- Standards -- United States; Auditors -- Professional ethics -- Standards -- United States

Disciplines

Accounting | Taxation

Comments

Originally published by: American Institute of Certified Public Accountants; Copyright and permission to reprint held by: American Institute of Certified Public Accountants.

Omnibus proposal of Professional Ethics Division interpretations and rulings;Proposed ethics ruling under Rule 101: Member Joining Client Credit Union;Member Joining Client Credit Union;Proposed ethics ruling under Rule 101: Member as Guarantor of Client's Loan  Member as Guarantor of Client's Loan;Proposed ethics ruling under Rule 102: Individual Considering or Accepting Employment With the Client  Individual Considering or Accepting Employment With the Client;Proposed ethics ruling under Rule 102: Service on Board of Tax Appeals;Service on Board of Tax Appeals;Proposed revision of interpretation 501-1 under Rule 101: Client's Records and Accountant's Workpapers;Client's Records and Accountant's Workpapers;Proposed revision of ethics ruling no. 17 under Rule 101: Member as Stockholder in Country Club;Member as Stockholder in Country Club;Proposed deletion of ethics ruling no. 34 under Rule 101: Member as Auditor of Common Trust Funds;Member as Auditor of Common Trust Funds;Proposed deletion of ethics ruling no. 17 under Rule 101: Member as Auditor of Mutual Fund and Shareholder of Investment Adviser/Manager;Member as Auditor of Mutual Fund and Shareholder of Investment Adviser/Manager; Exposure draft (American Institute of Certified Public Accountants), 1990, July 23

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