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ETHICS

able to evaluate and accept responsibility for the ■ The existing client or its affiliate is involved with
results of the practitioner’s service as is required an acquisition or other transaction that creates a
in all nonattest services in order not to impair the new affiliate, and the member expects to continue
practitioner’s independence. providing attest services after the effective date of
the transaction.
LOANS, ACQUISITIONS, AND OTHER In this situation, in order to continue to
TRANSACTIONS provide attest services after the effective date of
The revisions adopted through the SEC convergence the transaction, the member needs to take steps
project relate to the topics PEEC believed needed to end the independence-impairing relationship
to be addressed as a result of the SEC amendments with the new affiliate by the effective date of the
that took effect June 9, 2021. transaction. If such relationship can’t reasonably be
One topic addressed by these revisions is loans. ended by then (e.g., the new affiliate must transi-
In addition to permitting student loans from a lend- tion to a new nonattest services provider), the new
ing institution attest client when certain conditions guidance outlines specific steps that must be taken
are met, the revisions expand the current credit card in order to safeguard independence. These steps
provision to cover any kind of consumer loan. include evaluating the significance of the threats
The revision also clarifies the two situations created by the relationship; discussing the evalua-
where independence would be impaired when a tion with those charged with governance; keeping
covered member has a loan to or from an individual individuals off the attest engagement who have or
who is connected to a financial statement attest were involved with the independence-impairing
client or its affiliates. The two situations are when relationship; and ending the relationship as soon
the individual is: as possible, but no later than six months after the
■ An officer or director of the financial statement effective date.
attest client or its affiliate who has the ability to ■ The existing client is involved with an acquisition
affect decision-making at the financial statement or other transaction that creates a new affiliate, and
attest client; or although the member will not continue to provide
■ A beneficial owner who has significant influence attest services after the effective date of the transac-
over the financial statement attest client. tion, the report may cover periods after the effective
The member should use reasonable inquiries to date of the transaction.
determine beneficial owners of the attest client. When this happens, the independence-
A second topic addressed by these revisions is impairing relationship that the member has with
how to apply the affiliate guidance when a new the new affiliate will be extended to the existing
affiliate is created because of an acquisition or other client unless specific conditions are met. These
transaction that an existing client is involved with. conditions include, for example, having completed
The guidance details how relationships a member a significant amount of work on the client’s attest
has with the new affiliate can affect their indepen- engagement before the acquisition; expecting to
dence and how members should document this complete the remaining work within a reasonable
situation, and it reminds members to consider their period of time; and having those charged with
requirements under the “Conflicts of Interest for governance request the member continue with the
Members in Public Practice” interpretation engagement even though the member continues
(ET §1.110.010). to have the independence-impairing relationship
The three situations addressed by this new guidance with the new affiliate.
are as follows: Members who have questions on these
■ The existing client is acquired by the new affiliate, and changes to the Code or on other ethical matters
the member will not continue to provide attest services can call the Ethics Hotline at 1-888-777-7077
after the effective date of the acquisition. (select option 2, then 3) or email the Professional
In this situation, when the acquisition occurs Ethics Division at ethics@aicpa.org.
during the period of the professional engagement,
independence will not be impaired as a result of To comment on this article or to suggest an idea for
an independence-impairing relationship that the another article, contact Courtney Vien at
member has with the new affiliate, provided the Courtney.Vien@aicpa-cima.com or 919-402-4125. ■
report covers only periods prior to the effective date
of the acquisition.

34 | Journal of Accountancy June 2022