January 2001

The Society is at your service to answer questions on ethics and regulation. Contact Ann Spaulding at (212) 719-8300, aspaulding@nysscpa.org, or send a letter of inquiry to the Professional Ethics Committee at the Society’s address for a written response.

Member’s Spouse as Accountant of Client

Q. A member’s spouse is employed as an accountant by a client. Would the independence of the member or member’s firm be considered impaired under these circumstances?

A. Independence of the member or member’s firm would not necessarily be considered impaired. The performance of accounting services by the member would not impair independence if performed in accordance with the requirements of Interpretation 101-3. Therefore, the spouse of the member could perform the same functions as the member without impairing the independence of the member or member’s firm (this does not apply to Securities and Exchange Commission clients). If, however, the spouse’s functions were not in compliance with Interpretation 101-3, independence may be impaired and should be considered under Interpretation 101-9, “Spouses and Dependent Persons.”

Revealing Client Information to Competitors

Q. A municipality in a particular state enforces a personal property tax on business inventories, fixtures and equipment, and machinery by retaining a CPA firm to examine the books and records of the business to be sure the proper amount has been declared. In the course of its engagement, the CPA firm will examine sales, purchases, gross profit percentages, and inventories as well as fixed asset accounts. A member serving one of the companies involved objects to these procedures on the ground that information gathered from the books and records of his client could be inadvertently conveyed to competitors by employees of the CPA firm doing the audit. Is such an engagement ethically proper?

A. It would be proper for a member’s firm to perform such services. It should be emphasized to everyone concerned that Rule 301 prohibits members from revealing to others any confidential information obtained in their professional capacity.

Member Providing Services for Company Executives

Q. A member has been approached by a company, for which he or she may or may not perform other professional services, to provide personal financial planning or tax services for its executives. The executives are aware of the company’s relationship with the member, if any, and have also consented to the arrangement. The performance of the services could result in the member recommending to the executives actions that may be adverse to the company. What rules of conduct should the member consider before accepting and during the performance of the engagement?