AICPA Proposes Guidance on CPA Indemnification

The American Institute of CPAs’ Professional Ethics Executive Committee has issued an exposure draft of a proposed new interpretation that warns CPAs they should follow the requirements of governmental bodies, commissions or other regulatory agencies on indemnification and limitation of liability agreements with a client, or run the risk of discrediting the accounting profession.

The guidance reminds members that certain regulators prohibit the use of various indemnification and limitation-of-liability provisions, and that entering into such an agreement with a client who is subject to regulators’ requirements would be considered an act discreditable to the profession.

The committee is proposing an interpretation under Rule 501, Acts Discreditable (AICPA, Professional Standards, vol. 2, ET sec. 501), that would require members to comply with the requirements of regulators on the use of these provisions when providing audit or other attest services that are required by regulators.

The AICPA is encouraging members and other interested parties to comment on the proposal. Comments on the exposure draft will be accepted through Feb. 3, 2008, and should be sent to Lisa A. Snyder, Director, Professional Ethics Division, at lsnyder@aicpa.org.