The Professional Ethics Executive Committee (PEEC) is a senior committee of the AICPA responsible for interpreting, enforcing, and revising the AICPA Code of Professional Conduct. The committee typically meets quarterly for two days, with part of each meeting dedicated to standard-setting activities, which are open to the public, and part focused on case investigations and enforcement matters, which are confidential.
So far this year, PEEC has convened on February 20-21 and May 9-10. The agenda for these meetings includes topics such as International Ethics Standards Board for Accountants (IESBA) monitoring and convergence, Section 529 plans, simultaneous employment, private equity investments in firms, engagements subject to SSAEs, and artificial intelligence.
IESBA Convergence
A key goal of the AICPA’s PEEC is to achieve convergence with IESBA standards to ensure consistency among standard setters when possible. To this end, PEEC closely monitors all current IESBA projects to understand their developments and assess opportunities for convergence. Each PEEC meeting includes discussions and updates on these IESBA projects. Currently there are many IESBA projects that the PEEC is monitoring, including quality management, fees, legal services, technology, tax services, and engagement team group audits.
Section 529 Plans
One of PEEC’s current projects is Section 529 plans. PEEC is trying to both understand and determine how to address independence concerns raised by investing in Section 529 savings plans. They are seeking input on whether the underlying investments in a Section 529 savings plan are a direct or an indirect financial interest.
This project focuses on Section 529 savings plans and prepaid tuition plans, which are sponsored by state government or higher education institutions. PEEC developed the “Section 529 Plans” interpretation (ET sec. 1.240.070) nearly 20 years ago to help public practitioners maintain independence when investing in this type of plan.
However, over time, changes and enhancements have occurred that warrant a new look at independence related to this type of plan. For example, there are additional investment options now offered (risk-based portfolio options, age-based portfolio options, year of enrollment portfolio options, or single portfolio options), as well as the fact that often the account owner does not own the underlying securities, but rather a unit of participation in the 529 plan trust. This further complicates the determination of direct or indirect financial interest.
As a result, the Section 529 task force is trying to solicit feedback from the overall group for the underlying investments of these Section 529 plans and is further monitoring this agenda item.
Simultaneous Employment
PEEC has also been focusing on simultaneous employment or association with an attest client. The task force has had discussions about the definition of simultaneous employment, as well as whether other modifications to this subtopic are warranted. The task force is also considering adding an exception for individuals in the armed services. PEEC previously issued the Temporary Policy Statement Related to the Uniformed Services Employment and Reemployment Rights Act and Parallel State Statutes (USERRA) in 2021 to address this, but the PEEC’s Simultaneous Employment agenda item is a larger response.
Recent milestones for this project include the approval of a framework based on restricting covered members and those holding key positions from being simultaneously employed by an attest client, with certain exceptions. The task force will evaluate the impact of these changes and consider removing specific role references like “director” to apply the conceptual framework.
Private Equity Investments in Firms
Recently there has been a rise in private equity investments in public accounting firms. Since audits require adherence to independence rules, it often leads firms to split into advisory/consulting and assurance sides to maintain separation. However, questions remain about how truly separate these entities are. For these alternative practice structures, it is crucial to determine whether existing guidance is sufficient or if new guidelines are needed. This process is in its early stages and feedback is being gathered.
Engagements Subject to SSAEs
PEEC is discussing potential revisions or nonauthoritative guidance for the “Independence Standards for Engagements Performed in Accordance with Statements on Standards for Attestation Engagements” (ET sec. 1.297). The focus is on ensuring clarity and consistency in practice for SSAE engagements. The task force is evaluating how existing nonattest service interpretations apply to SSAE engagements and considering potential revisions or nonauthoritative guidance on independence.
Artificial Intelligence
Another priority on PEEC’s agenda is raising awareness about the various threats associated with the use of artificial intelligence (AI). The AI project aims to address convergence needs related to IESBA guidance on the use of output technology. PEEC is currently assessing whether AI topics necessitate changes to the AICPA Code of Professional Conduct or nonauthoritative guidance. The task force is considering how to align with IESBA’s guidance on technology output.
Future PEEC meetings open to the public are scheduled for August 13, 2024, and November 12, 2024. It will be very exciting to see how PEEC decides to move forward with their agenda items!
