Ep. 19: PPP forgiveness engagements — Ethics and other considerations

September 3, 2020

You may need to consult several parts of AICPA Professional Standards when performing a PPP forgiveness engagement. Listen as Toni Lee-Andrews, Director of the Professional Ethics Division, Jim Brackens, Vice-President of Ethics and Practice Quality, and Bob Dohrer, Chief Auditor on the Audit and Attest Standards team discuss the various standards governing forgiveness engagements: consulting, attestation, peer review, accounting and review, and the Code of Professional Conduct.

Resources mentioned in this episode:

Our next meeting of the Professional Ethics Executive Committee is November 17. We'd love you to join us. Go to www.aicpa.org/PEECmeeting and register to attend.

If you have questions about the substantive content of this episode, please call the ethics hotline at 888.777.7077 (option 2, then option 3) or email ethics@aicpa.org.

If you’d like to suggest topics for future episodes, please email ethicallyspeaking@aicpa.org.


Intro: Welcome to ethically speaking the podcast of the AI CPA professional ethics division, the paycheck protection program has been in the news and on the minds of CPA for a good part of 2020 so far. Questions about helping clients with the loan application have given way to questions about the forgiveness process.

This is the first of two episodes on helping your clients with forgiveness. This first episode covers areas of the AICPA professional standards, you need to be aware of when helping your clients with loan forgiveness, including the code of conduct.

Listen as Toni Lee-Andrews, Director of the ethics division, hosts a discussion with Jim Brackens AICPA vice president of ethics and practice quality and Bob Dohrer, Chief Auditor of the AICPA Audit and Attest Standards team.

Toni Lee-Andrews: Jim, Bob, thanks for joining me today for our Ethically Speaking podcast. Both of you contributed recently to a Journal of Accountancy article entitled “PPP client forgiveness services questions and answers for CPAs” and it had a lot of information in there about working on loan forgiveness and how that needs to be approached. How practitioners need to think about AICPA professional standards, keeping in mind consulting services, accounting and review services, attestation and also the Code of Professional Conduct, thinking about independence, integrity, confidentiality, and of course compliance with all of those standards. This is a really important topic we have been getting a lot of questions about and the primary one that we've been getting on the ethics hotline is whether helping a client with the forgiveness process, whether that impairs independence.

Sue Coffey, who's our executive vice president of public practice, pointed out in a recent town hall that since helping with the forgiveness process is a nonattest service, it won't impair your independence as long as you're complying with the nonattest services subtopic in the AICPA code.

So I want to make sure that our listeners know that when they're performing nonattest services that the client assumes all management responsibilities, oversees the services that they provide by having somebody with suitable skill, knowledge, and experience, that the adequacy of the services and the results of the services that are provided are evaluated, and also really important that the client accepts responsibility for the results of the service.

So Jim, Bob. Let's talk about those types of things and how that might be violated in the forgiveness process.

Jim Brackens: Toni, I have to add, the “Jim Bob” takes me back to my college days when I had a roommate, Bob. And that was the House on the Prairie, and we were always referred to as Jim Bob.

You hit it. You mentioned that what you listed the general requirements, and that's what Sue was referring to, that when this is a nonattest service and what you just mentioned, is what a

A CPA would have to do. In helping with the loan forgiveness process, the analogy I tend to use is, it’s similar to doing a tax return, you know, you can Use to say use the ICP a calculator, we have out there a client who provides the information, you know you use the calculator to come up with all the information that needs to go in the form, you complete the form, go over it with a client so they understand what's there, assuming they have the suitable skills, knowledge, experience, we presume our clients do at the management level and [the CPA] didn't assume responsibility or sign the form. And that's, you're done. That's a nonattest, the simple monitor service. Again, very similar to a tax return.

Toni Lee-Andrews: I think that's a great analogy. And, you know, really importantly, as you mentioned, once the CPA helps with that process and the application is completed that the client reviews that before it's submitted.

Bob Dohrer: I think when you know maybe just picking up a little bit on that. Certainly if you've

referenced or had a look at our PPP forgiveness matrix that that we've published, we, of course, cover different types of engagements that the CPA could perform with respect to the PPP funds and you know the two basic ones that we covered there are, you could do it under the consulting standards or you could do something under agreed upon procedures, a PR attestation standards and I think, you know, we get questions about when should I be in one or when should I be in the other. And I think the answer is there is no right or wrong answer actually, but it's really trying to understand what your client is really looking for. What their knowledge and expertise is with respect to, you know, the funding requirements. The forgiveness requirements, things like that. The nice thing about a consulting engagement, of course, is that you can design that to help and assist your client certainly would fall into that category of nonattest services that Jim and Toni have alluded to, so you have to go through all of that. If you are providing services to the client that requires independence. I think one thing that you know, we have noticed is that there's work being done by CPAs for clients for whom independence is not required. Otherwise, and certainly consulting standards in that scenario is certainly an option, I would point out, you know, very quickly with the consulting standards, the way they are organized under our Statement on Standards for Consulting Services.

The report is generally restricted to management and so if the client is looking for something that they would share with others, that would not be a very good route to go. On the other hand, agreed upon procedures has, you know, some benefits, also, of course, if you're providing other services that require independence, so does AUP. So in likely all likelihood, you've already considered all the independence implications and that might be a route to go.

The other thing I think that is nice, or an attractive feature the agreed upon procedures route is that the whoever engages you to perform these procedures before a report is issued will have to acknowledge that those procedures performed were appropriate for the intended purpose for which you are engaged. So there's an agreement that is struck between the CPA, the engaging party, and in most cases the responsible party will also be the engaging party, you simply can describe their procedures that you performed and the results thereof in a factual manner under our new attestation standards if early implemented. As matter of fact that agreed upon procedures report can be generally used if you'd like to share that or the client would like to share that, for example, with a lender or other bodies.

That would be another attractive feature of performing under the agreed upon procedures engagement, so there's just some things to think about. Really, what is your client looking for, what are the expectations, how will the service be used. And I think that'll drive you down those options that we have available to us.

Jim Brackens: It's a good point before and we were talking about the nonattest nature when we started out when Toni was mentioning that was, I should point out that you alluded to it that is if you are not doing anything that requires independence, then you know you don't really need to worry about that. But what you do mention with the agreed upon procedures, I want to point out one more standard, we have to think about in this. Peer review, you know, if the practitioners don’t do attest work and the client does want that agreed upon procedure engagement where yes, you have to consider independence, you also have to consider peer review because if you're not enrolled in peer review and having one performed, you will perform that AUP engagement, it will be included in the scope period.

Toni Lee-Andrews: That's a good point. Jim, and also want to mention to you, Bob. You were talking about the difference between the agreed upon procedures and the consulting engagements. And, you know, CPAs are being asked to do so much within this process, both with the initial application and then on the back end, the forgiveness. Sometimes they may be asked to do both, right, a consulting engagement on the front end and an AUP on the back end. What happens then?

Bob Dohrer: Yeah, I think you know Toni essentially CPAs have been viewed as being very valuable in this entire process to the public at large. So it's something that we certainly can contribute again it comes back to the fundamentals of course anytime.

You need to be careful, I think, especially if the sequence of those types of services consulting and then AUP you now have the independence implications coming along with it. So you have to look back at what you did in a consulting mode and make sure that you've covered those nonattest service requirements that that you've alluded to earlier.

When you do that, you can do both. That’s certainly fine. But just to be careful, all the time, especially, like I said, if it's a sequence where the consulting comes first and they AUP next, and you haven’t otherwise had any independence implications. That's something you'll need to be very careful of.

Toni Lee-Andrews: Absolutely. I want to circle back around to what we started with what the clients are responsible for. But you know the CPA also in terms of complying with standards has to possess the competency and ability to perform the services with due care.

And Jim. I think that in the Journal of Accountancy article we touched on that as well because keeping up with the ever-changing rules is definitely a necessity here.

Jim Brackens: Totally, totally agree. Toni, you know that is getting into it from an ethical point of view, yes. You've got due care that if we’re in the AUP, we're in the quality control standards, competency, you know, is integral to that process as well. So yes, and I think the intent in the article was that, you know, because this was a quickly changing environment and the rules were changing so rapidly, you had to make sure something else and still have to make sure that some guidance hasn't come out that it's outdated something that you understood previously that that was the intent there.

Bob Dohrer: Yeah, I think Jim just to just to add on to that it is clearly, if you're a student of this process and you go back all the way into late March when the, when the legislation was enacted and follow Treasury, all the way through and the SBA and things like that. There's those there's been multiple interim final rules which kind of is an oxymoron, in itself, I guess, but that have changed or interpreted the requirements as we've moved along and those have been accompanied by a number of Frequently Asked Questions and things like that. So staying abreast of currently where things are with respect to that program is definitely a challenge and something we need to make sure we're doing.

Toni Lee-Andrews: Definitely. Ever changing, changing every day. Right?

Well thank you both for joining me today. Thanks to our listeners and look for our next episode, we're going to dive into some specific questions from our hotline. If you have questions about the technical content of this episode call 887.777.077 option two then option three. If there are other topics that you'd like to hear us cover send us an email to ethicallyspeaking@aicpa.org.

You can find links to the resources that were mentioned in this episode on the show notes page. And while you're there, don't forget to hit the subscribe link so that you won't miss future episodes. Again, thanks for listening.