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Ethics standards for emerging issues
As the business landscape rapidly evolves, so too must the CPA profession’s ethical rules to address emerging challenges.
Developing issues and services—ranging from artificial intelligence and cybersecurity risks to sustainability reporting and the changing nature of work—are testing the limits of existing ethics rules. To maintain public trust and integrity, the profession’s ethics rules are adapting to address these new realities, ensuring that guidance remains relevant and practical in an era of unprecedented change, safeguarding the profession’s core principles while embracing innovation.
At the February 2025 meeting of the AICPA Professional Ethics Executive Committee (PEEC), reports were provided on the project plans of multiple task forces addressing emerging issues being addressed in accounting. Some highlights include:
Alternative practice structures
As CPA firms seek broadening sources of capital, a PEEC task force was appointed in November 2022 to determine whether private equity (PE) investment in a nonattest entity of an alternative practice structure (APS) created a need to revise any aspects of the AICPA Code of Professional Conduct or provide interpretive guidance. At its February 2025 meeting, PEEC reviewed a draft discussion memorandum to be released for public comment.
Some potential differences in a PE-owned APS include a possible lack of common control, potentially not “cooperating for the purpose of enhancing the firm’s capabilities to provide professional services,” and departures in the definitions of influence and control. Several new threats to independence and factors to consider when evaluating the significance of threats are proposed, with potential safeguards.
The discussion memorandum is due to be released for a public comment period likely to conclude in June 2025.
Attest engagements that do not include financial statements
A PEEC task force is considering revisions to SSAEs to better address attest engagements that do not include financial statements, such as cybersecurity and sustainability reporting, including:
Revising to a definition of the “period covered by the attest report” rather than the “period covered by the financial statements”
Broadening to terminology such as “subject matter of the attest engagement” and “attest engagement plan”.
Adding examples of services that are SSAE engagements
Digital assets
PEEC reviewed three draft Q&A documents, addressing:
Determining if bitcoin provides a financial interest in an entity
Independence when a member’s bitcoin is held by an attest client
Independence for entities only performing the recordkeeping of a covered member’s bitcoin account
The Q&A documents are to be released with proposed revisions.
Section 529 plans
With the increased use of Section 529 savings plans for higher education, it can be difficult to monitor the underlying investments for independence purposes. Original ethics guidance on 529 plans specified that the 529 account owner holds a direct financial interest in underlying investments, because the account owner can select from available portfolios, has information on the underlying investments in portfolio options at the time of selection, and is notified of changes in the underlying investments of portfolio options.
In an exposure draft issued in August 2024, PEEC identified many Section 529 plan characteristics that more closely align with the definition of an indirect financial interest. Since a material indirect financial interest in an attest client impairs independence, the draft provides specific safeguards a covered member can apply when such holdings become material, such as changing portfolio options to no longer include a material indirect financial interest. The covered member’s independence will be impaired if they audit the plan itself in which they are an account owner.
A final standard is expected with a May 31, 2025 effective date.
Simultaneous employment with an attest client
Changes in the nature of work, including an increased use of remote workers, independent contractors and holding multiple jobs, gives rise to new challenges addressed in a PEEC exposure draft issued in December 2024, Simultaneous Employment or Association With an Attest Client.
The exposure draft adopts a principles-based approach to defining “simultaneously employed or associated” and provides a specific exception for covered members serving in the U.S. Armed Forces. Rules continue to prohibit simultaneous employment and association by covered members and disallowing key positions, while allowing firms to evaluate threats and safeguards using the conceptual framework in other circumstances.
Comments on the exposure draft are requested by March 16, 2025.
IESBA Strategy and Work Plan
Priorities in the International Ethics Standards Board Strategy and Work Plan that may result in future U.S. conformity projects include:
Developing a scalable, principles-based firm culture and governance framework
Implementation of recently adopted ethics and independence standards for sustainability assurance reporting
Implementation of recently adopted ethics and independence standards related to using the work of external experts, including in tax planning, technology services, and sustainability reporting and assurance
As the accounting profession navigates an era of rapid transformation, the evolution of its ethical rules is essential to maintaining trust, integrity and relevance. By proactively addressing emerging risks, these updated standards ensure that CPAs are equipped to exercise professional responsibility in an increasingly complex business world.
OSCPA President & CEO Laura Hay, CPA, CAE, is the staff liaison to the Accounting, Auditing, Professional Ethics Committee and the Peer Review Ethics Committee. She can be reached at Lhay@ohiocpa.com or 614.321.2241.
