AICPA delays effective dates of ethics rules due to coronavirus
The American Institute of CPAs’ Professional Ethics Executive Committee has decided to postpone the effective dates for three of its ethics interpretations in its Code of Professional Conduct for one year, due to the impact of the novel coronavirus pandemic. Similarly, the AICPA Peer Review Board is granting CPA firms a six-month automatic extension in the Peer Review Integrated Management Application. The AICPA also sent a set of recommended changes Thursday in the Tax Code to Congress.
The committee voted Wednesday to give CPAs an extra year to adjust to the rules governing how CPAs should act when providing attest services to their clients in three parts of the ethics code, which involve information systems services, state and local client affiliates, and leases.
- The “Information Systems Services” interpretation is now effective Jan. 1, 2022, but early implementation permitted.
- The “State and Local Government Client Affiliates” interpretation is now effective for years beginning after Dec. 15, 2021.
- The “Leases” interpretation is now effective for fiscal years starting after Dec. 15, 2020 with early implementation permitted.
The move provides more flexibility at a difficult time as accountants and their clients cope with the pandemic.
“In addition to dealing with their own struggles with COVID-19, our members have been extremely busy assisting their clients navigate through the pandemic,” said AICPA vice president of ethics and practice quality Jim Brackens. “The Professional Ethics Executive Committee understood it would be difficult for CPAs to effectively implement their three recent interpretations in this environment and so provided the one-year relief.”
Peer review extensions
Separately, the AICPA’s Peer Review Board voted to grant a six-month automatic extension in Peer Review Integrated Management Application (PRIMA) to CPA firms with reviews, corrective actions or implementation plans with original due dates falling between Jan. 1 and Sept. 30, 2020.
“Several regulators and standard setters have recently extended their due dates for filings and effective dates of standards, recognizing that our members are quite occupied assisting their clients in navigating through the pandemic, not to mention dealing with their own struggles,” said Brackens in a statement Thursday. “Today the AICPA Peer Review Board further provided relief by giving additional time for firms to comply with peer review requirements.”
The Peer Review Board originally suggested in March that the AICPA Peer Review Program find a way to help CPA firms undergoing their reviews this year amid the coronavirus pandemic. Various options were considered, and they decided to implement automatic extensions would be the best option to help small firms dealing with the pandemic.
Here are examples of what the extension means for CPA firms:
Example 1: Firm undergoing peer review:
Original due date: March 31, 2020
Extended due date: May 31, 2020
New due date: Sept. 30, 2020 (six months from original due date)
Example 2: Firm undergoing peer review:
Original due date: Nov. 30, 2019
Extended due date: Feb. 29, 2020
New due date: Feb. 29, 2020 (no change as firm’s original due date was in 2019)
Example 3: Firm required to complete a corrective action plan:
Original due date: Feb. 29, 2020
Extended due date: April 30, 2020
New due date: Aug. 31, 2020 (six months from original due date)
Example 4: Firm required to complete a corrective action plan:
Original due date: Sept. 30, 2020 (established by Report Acceptance Body (RAB) at June 1, 2020 meeting).
Extended due date: N/A (the Report Acceptance Body established the due date after the PRB approved automatic extensions. At each meeting after Peer Review Board approval, RABs should consider the continuing impact of the pandemic when establishing the due date for corrective actions).
The PRB plans to continue to monitor the impact of COVID-19 through the summer months and will decide whether automatic extensions would be appropriate for CPA firms with due dates after Sept. 30, 2020.
Separately, on Thursday, the AICPA sent a set of recommendations to Congress for updating some areas of the Tax Code in light of the pandemic.
“Main Street businesses are a vital part of the economy and the tax system should support, encourage, and adapt to the rapid changes in technology and small business processes that continuously push us forward,” AICPA Tax Executive Committee chair Christopher W. Hesse wrote in a letter to the leaders of Congress’s tax-writing committees. “The tax system is typically ‘behind’ the current environment, perpetually catching up. The pandemic highlighted the antiquated nature of some of these provisions and modernizing these for small businesses ensures that the system is proactive in responding to future events.”
The letter offers recommendations on three specific areas:
- Small-business barriers, such as the alternative minimum tax for individuals, trusts and estates; limited business deduction of state and local taxes; and unreasonable application of syndicate rules;
- Proposed technical corrections to the recent CARES Act, such as allowing deductions for Paycheck Protection Program expenses and allowing taxpayers to use operating losses to offset only non-GILTI (Global Intangible Low-Taxed Income) money;
- Other legislative recommendations, such as providing a tax credit that allows small businesses to invest in technology and provide virtual offices; repeal or significantly increase flexible spending account caps; and create a uniform rule allowing for basis-first retirement plan distributions.
“Congress has rapidly responded to the needs of small businesses in response to the COVID-19 pandemic,” said Hesse in a statement. “Long-term, strategic planning to modernize the tax system in a way that helps small businesses thrive in the future is an important step to promoting good tax policy. We urge Congress to thoughtfully consider these recommendations to remove barriers that impede small businesses today and in the future, thus ensuring more consistency, fairness, and certainty in our Tax Code.”