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Tax Planning Ethics, Sustainability Projects Focus of AICPA PEEC Meeting

At a Feb. 21, 2023, meeting, AICPA's Professional Ethics Executive Committee discussed a recently issued exposure draft from the International Ethics Standards Board for Accountants proposing revisions to the Code of Professional Conduct for Tax Planning. It is important to keep an eye on these discussions because the AICPA is a member of the International Federation of Accountants, so it is required to maintain substantially similar codes of professional conduct.

Mar 3, 2023, 05:07 AM

Allison Henry, CPABy Allison M. Henry, CPA, CGMA, PICPA Vice President, Professional and Technical Standards  


At its meeting on Feb. 21, 2023, the AICPA Professional Ethics Executive Committee (PEEC) discussed a number of emerging convergence projects, including a recently issued exposure draft from the International Ethics Standards Board for Accountants (IESBA) proposing revisions to the Code of Professional Conduct for Tax Planning and Related Services and new IESBA projects on sustainability and the use of experts.  

The international standards are important to keep an eye on because the AICPA, as a member body of the International Federation of Accountants, is required to maintain a similarly restrictive code of professional conduct.  

Tax Planning and Related Services

Official rubber stamps: one says "rules" the other "regulations"Responding to concerns about tax avoidance and the role consultants and tax practitioners played in recent tax avoidance scandals, the IESBA issued an exposure draft that proposes revisions to the IESBA Code for Tax Planning and Related Services. The proposals would be applicable to both accountants in business and those in public practice. The proposed framework includes the following:

  • Outlines the types of threats to compliance with ethics principles that are created with tax planning (e.g., acting in the public interest, considering reputational risks, and confidentiality).
  • Establishes a principle that professionals can only recommend or otherwise advise on a tax planning arrangement if they have determined that there is a credible basis in laws and regulations for it.
  • Requires that before determining whether to proceed with a recommendation or advice the professional consider the reputational, commercial, and wider economic consequences that could arise from the way stakeholders might view the tax planning arrangement – a “stand-back” test.
  • Provides practical guidance for addressing uncertainty in tax planning.
  • Addresses other practical matters, including disagreement with the client, management, or those charged with governance, and documentation.

Some concerns were raised during the PEEC meeting about specific wording with regard to the United States and other tax jurisdictions, and questions were raised regarding whether practitioners are trained to perform the proposed “stand-back” test. It is imperative that the PICPA receive feedback from our members. Comments on this exposure document are due May 18, 2023, which doesn’t leave much time to provide a response. The final pronouncement is expected to be issued in December 2023.  

Sustainability

Andy Mintzer, an IESBA member, highlighted the status of the IESBA Sustainability project and the Use of Experts Task Force. The purpose of the sustainability project, he explained, is to develop profession-agnostic independence standards for use by all sustainability assurance practitioners and the specific ethics provisions relevant to sustainability reporting and assurance. The intent of the Use of Experts Task Force is to develop an ethical construct for use when a practitioner is using an expert. The Use Of Experts Task Force is running in tandem with the sustainability project. They are planning to convene public roundtables in March/April 2023, and are expecting an exposure document by the end of 2023.  

Other Business

The PEEC also discussed the following items:

  • Convergence with IESBA’s recent revisions to the definitions of the terms “Listed Entity” and “Public Interest Entity” in the Code is effective for audits of financial statements for periods beginning on or after Dec. 15, 2024, with early adoption permitted. The IESBA Code creates additional independence requirements when the attest entity is a public interest entity. PEEC is in the process of developing converged guidance that takes into consideration the impact of the regulatory environment in the United States (e.g., Securities and Exchange Commission, Government Accountability Office, Department of Labor (DOL), etc.). PEEC expects to issue an exposure document with proposed converged guidance in May 2023.  
  • Revision to the Q&A on unpaid fees, which clarifies the impact of the unpaid fee guidance on covered members other than the engagement partner.  
  • Convergence with IESBA rules on fee dependency. PEEC discussed the exposure of two new interpretations and revisions to the conceptual framework for independence related to fees.
  • Solicitation or disclosure of CPA examination questions and answers – The PEEC is proposing expanding the Solicitation or Disclosure of CPA Examination Questions and Answers Interpretation to incorporate questions or answers, or both, of any continuing professional education course (other than for those in which collaboration is expected).
  • The IESBA finalized technology-related revisions to the Code developed by IESBA’s Technology Task Force. These changes generally address confidentiality and the use and safeguarding of data; ensuring competency when using technology and managing complexity; new independence considerations when providing, selling, reselling, or licensing technology; or when assisting clients with IT related services. The final pronouncement is expected to be released in April 2023, with the ethics-related provisions effective as of Dec. 15, 2024, and the independence-related provisions effective for audits of financial statements for periods beginning on or after Dec. 15, 2024, with early adoption permitted. The PEEC is in the process of performing a gap analysis to determine if changes to the AICPA Code are needed to remain aligned with the IESBA Code.  
  • The Private Equity Investment Task Force was created after the November 2022 PEEC meeting to make sure that the AICPA Code is sufficiently robust to address the related issues associated with practice changes due to private equity investment (e.g., independence considerations, etc.). The task force will meet in March 2023.  
  • The AICPA updated its DOL-to-AICPA independence comparison to take into consideration the DOL’s revisions to its independence requirements communicated via an interpretative bulletin issued in September 2022. The AICPA indicated that it is working to meet with the DOL to determine whether it would consider making further changes to its independence requirements.  

Please reach out to me at ahenry@picpa.org or at (215) 972-6187 with your input on any of these important projects.  


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Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of the PICPA's officers or members. The information contained herein does not constitute accounting, legal, or professional advice. For actionable advice, you must engage or consult with a qualified professional.



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Disclaimer

Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of PICPA officers or members. The information contained in herein does not constitute accounting, legal, or professional advice. For professional advice, please engage or consult a qualified professional.

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