The fact remains, most accounting firms have little to no succession plan in place, so to address those, the Professional Ethics Executive Committee of the American Institute of CPAs (AICPA) has released two new interpretations of the AICPA Code of Professional Conduct and revised an existing interpretation.
Here are the key issues addressed in each case:
- Mergers and Acquisitions: Effective Jan. 31, 2016, this rule addresses firms that are in and out of networks, what constitutes a network, alternative practice styles, attest and non-attest services, and customer confidentiality issues. For example, when a firm merges with or acquires another firm or a firm is acquired by another firm, threats to compliance with the “Independence Rule” (requiring independence in professional practice) may happen as a result of employment or association with, or providing non-attest services to, an attest client of the acquired or acquiring firm.
- Transfer of Files and Return of Client Records in Sale, Transfer Discontinuance or Acquisition of a Practice: Effective June 30, this addresses how client files should or should not be transferred and in what situations, and how a practice should be handled when it is being discontinued and not acquired. For example, a firm that sells or transfers all or part of its practice to another person, firm or successor firm – and won’t retain any ownership in the practice – should request clients’ authorization to transfer files to the successor firm. Clients should be notified that their consent may be presumed if they aren’t heard from within 90 days. The firm’s seller should not transfer any client files until the consent is obtained or the 90-day limit has expired, whichever is shorter.
- Disclosing Client Information in Connection with a Review or Acquisition of the Member’s Practice: Effective Oct. 31, 2016, this addresses the confidential client information rule, and confidentiality agreements with prospective practice purchasers. For example, buyers of a firm can review the seller’s practice but that may threaten the seller’s compliance with client confidentiality. To reduce that threat, the seller must take precautions (such as a written confidentiality agreement with the buyer) to ensure that client confidentiality is preserved during the review of the practice.
About Terry Sheridan
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.