Ethics and Regulations Q&As

By Ann E. Spaulding

The NYSSCPA offers assistance for members' questions on ethics and regulation. The AICPA has recently adopted the following rulings, which the Society does not officially adopt but the Professional Ethics Committee uses as guidance.

Member Removing Client Files from an Accounting Firm

Q. If the relationship between a firm and a member who is not an owner of the firm is terminated, may he or she take or retain originals or copies from the firm's client files or proprietary information without the firm's permission?

A. No. Except where permitted by contractual arrangement.

Member's Investment in Financial Services Products that Invest in Clients

Q. Amounts contributed by a member or a member's firm for investment purposes, including retirement plans, are invested or managed by a nonclient financial services company that offers financial services products (for example, insurance contracts and other investment arrangements) that allow the member to direct his or her investment into debt or equity securities. Under what circumstances would the independence of the member be considered to be impaired?

A. If the member has the ability to direct and does direct his or her investment through a financial services product into a client, the independence of the member would be considered to be impaired with respect to that client because such an investment is considered to be a direct financial interest in the client as defined under Interpretation 101-1. If the member does not exercise his or her ability to direct the investment but the financial services product was to invest in a client, such investment would be a direct financial interest in the client and independence would be considered to be impaired.

If the member does not have the ability to direct the investment and the financial services product invests in a client, the member is considered to have an indirect financial interest in the client. If the indirect financial interest becomes material to the member, the member's independence would be considered to be impaired.

Further, an investment in a financial services product that invests only in clients of the member is considered to be a direct financial interest in such clients, and independence would be considered to be impaired.