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State Board Report

July 2013

Find someone on your State Board to review the AICPA’s Code of Conduct’s codification and then have him or her come back to discuss it with the entire Board as to its implications for your state, advised NASBA Director-at-Large and Ethics Committee Chair Raymond N. Johnson (OR), at the Eastern Regional Meeting. Each State Board should take the opportunity to review their code of conduct and see how it matches up against the AICPA’s, he said. For example, some states’ rules are more stringent on record retention than the AICPA’s, he noted. The comment period for the AICPA’s 300-page exposure draft ends August 15. Dr. Johnson said the NASBA Ethics Committee is preparing a comment letter.

The codification incorporates two new conceptual frameworks, one for those in public practice and one for those in business, explained New Jersey State Board of Accountancy President John F. Daily, Jr., a member of the AICPA’s Professional Ethics Committee (PEEC), at the Western Regional Meeting. The framework is applied only when there is no specific guidance on a particular relationship or circumstance in the Code. Then the CPA has to identify threats and apply the necessary safeguards to reduce the threat to an acceptable level. A CPA would be considered to be in violation of the applicable rule of conduct if he or she could not demonstrate that safeguards were applied that eliminated or reduced the significant threats to an acceptable level of risk.

Among the recent changes in the Code pointed out by both Mr. Dailey and Dr. Johnson were: the deletion of the “holding out” provision. CPAs are to be held to the Code of Conduct whether or not they hold themselves out to the public as a CPA. In the area of responding to client requests for records, the AICPA Code points out that some State Boards’ rules may be more restrictive, calling for records to be returned to the client whether or not fees are paid, as does the Uniform Accountancy Act. CPAs who are not partners but act in a partner capacity with respect to attest engagements are subject to the same independence rules as are partners, effective with engagement beginning on or after December 15, 2014.

It is anticipated the revised Code will be adopted in the first quarter of 2014 and effective by the end of 2014.

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