Independence Considerations and COVID-19

by Heather M. Demshock, CPA | May 27, 2021

COVID-19 has been full of challenges, but it has also created opportunities for CPA firms to provide new professional services. According to a recent poll, 55% of accounting firms created new services as a result of the pandemic.1 Some nonattest offerings include advisory services related to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, cybersecurity consulting, cash flow management advisory, business continuity, bankruptcy or restructuring consulting, assistance with insurance claims, and tax strategy consulting.2 But when changes within the profession happen rapidly, CPAs need to be even more vigilant over the public interest and to have a heightened focus on ethics.

When a CPA performs a nonattest service for an attest client (including those services listed above), he or she runs the risk of noncompliance with the rules of independence. The objectivity and independence principle of the AICPA Code of Professional Conduct (ET Section 0.300.050) states that “a member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities. A member in public practice should be independent in fact and appearance when providing auditing and other attestation services.” Requirements for providing nonattest services are included in Section ET 1.295.040, but, in summary, when independence is required the client must assume all management responsibilities; must oversee the service by designating an individual (preferably in senior management) who possesses suitable skill, knowledge, and/or experience; must evaluate the adequacy and results of the services performed; and must accept responsibility for the results of the services. Meeting these safeguards lessens the threat to independence to an acceptable level.

The CARES Act – specifically the Paycheck Protection Program (PPP) – created many opportunities for CPAs to assist clients. Before diving in, however, CPAs should consider the independence ramifications. Does helping a client with the PPP process impair independence? This was covered in a recent episode of AICPA’s podcast, Ethically Speaking. The hosts provide the following useful analogy: the service provided for the PPP forgiveness process is similar to a tax return service. A CPA should use information provided by the client, calculate the forgiveness (the AICPA provides a calculator on its website), and complete the necessary forms. Once prepared, the CPA should review the forms with the client (the client should have the suitable skill, knowledge, and/or experience to understand these forms). Management then assumes responsibility and signs the form. It’s a simple nonattest service similar to tax return preparation.3

The above example is accurate, assuming the service requires independence. Work performed by CPAs related to the PPP process could be considered a consulting engagement under CS Section 100 or an agreed-upon procedure under Statement on Standards for Attestation Engagements No. 19. The hosts of Ethically Speaking also cover AICPA’s PPP loan forgiveness services matrix. This tool could be helpful to CPAs in determining what services can be provided given any ongoing or concurrent relationships the CPA has with the client. It may also help a CPA decide if these services should be considered consulting engagements or agreed-upon procedures. According to the podcast, it depends on a number of factors. What is the client looking for from the CPA? What is their knowledge and expertise with respect to funding and forgiveness requirements? What are their expectations and how will the CPA services provided be used? All of these factors should be considered when determining what type of engagement is being provided.4

If a CPA determines he or she is performing an agreed-upon procedure, independence is required; it is not technically required for a consulting engagement. However, CPAs need to be careful on the sequence of services provided. For instance, if a CPA provided consulting services followed at a later date by agreed-upon procedures, the CPA would need to look back at what was done in consulting mode to determine if they complied with the nonattest service requirements.5

In summary, helping a client with the PPP loan process won’t impair your independence as long as you’re complying with the nonattest services subtopic in the AICPA Code. From an ethics standpoint, another item to note is that CPAs also have the responsibility to possess the competency and ability to complete services with due care.6 Over the course of the pandemic, there have been numerous changes to the PPP process. Keeping up with the ever-changing rules and regulations is an absolute must to provide services with due care.

1 Cathy Allen, “Nonattest Services & Independence in the Age of COVID-19, Part 1,” Audit Conduct News (2020). 5 (5).
2 Ibid.
3 “PPP Forgiveness Engagements – Ethics and Other Considerations,” Ethically Speaking (podcast episode No. 19), AICPA (Sept. 3, 2020).
4 Ibid.
5 Ibid.
6 AICPA Code of Professional Conduct, AICPA (2014).


Heather M. Demshock, CPA, is associate professor of accounting at Lycoming College in Williamsport and a member of the Pennsylvania CPA Journal Editorial Board. She can be reached at demshock@lycoming.edu.

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