The Issue

In June 2024, the AICPA Professional Ethics Executive Committee (PEEC) proposed revisions to the AICPA Code of Professional Conduct addressing independence when firms provide tax services to attest clients. The proposal was developed in connection with PEEC’s efforts to consider greater harmonization with international ethics standards.

The PICPA supported the underlying objective of ensuring that firms appropriately identify and evaluate independence threats arising from tax advisory and planning services. However, the proposal included a more-likely-than-not threshold for evaluating certain tax positions when determining whether independence would be impaired.

The PICPA was concerned that this bright-line threshold would be difficult to apply in practice. Tax positions frequently involve complex facts, competing interpretations, evolving legal authority, and significant professional judgment. Applying a single threshold could unnecessarily restrict legitimate tax advisory services without necessarily providing a corresponding improvement in auditor independence.

Our Position

Once PEEC released its exposure draft, we engaged members of PICPA’s Ethics Committee and tax subject-matter experts to evaluate how the proposed requirements would operate in practice.

The PICPA supported strengthening guidance to help practitioners identify and evaluate independence threats associated with tax services, but recommended that PEEC do the following:

• Move away from a bright-line, more-likely-than-not threshold for determining when independence is impaired.
• Adopt a principles-based approach that recognizes the complexity and judgment inherent in evaluating tax positions.
• Allow consideration of relevant facts and circumstances, including applicable tax law and the positions of relevant taxing authorities.
• Ensure that efforts to harmonize U.S. and international ethics standards appropriately reflect differences in the U.S. legal, regulatory, and tax environment.

Our advocacy objective was to achieve strong independence protections while ensuring that the resulting requirements would be practical and workable for CPAs.

The Outcome

PEEC responded to stakeholder concerns and revised its approach. The final interpretation moved away from the proposed bright-line threshold and instead incorporates a more principles-based framework for evaluating independence threats associated with tax services.

The revised guidance maintains an important focus on auditor independence while better recognizing the professional judgment required when evaluating complex tax matters. The new requirements are effective Jan. 15, 2027.

Thank you for staying engaged. Your voice is what makes this advocacy work. To learn more about how your participation influences our professional standards, check out the CPA Now blog "Advocacy Win Emphasizes Why Engagement in Standard-Setting Matters."