Beginning on September 1, 2018, AICPA Code of Professional Conduct, ET Section 1.295.143, Hosting Services, takes effect for public accounting firms. This new independence rule prohibits accounting firms from acting as the sole host of financial or nonfinancial information of an attest client, having sole custody for storing records, and providing backup of the attest client’s data. An accounting firm may still continue to retain copies of financial information and maintain a copy of tax returns, as well as other specified items per the standard.
The AICPA Peer Review Committee has emphasized to peer reviewers that firms need to have adequate documentation in place to demonstrate compliance with the non-attest rule. This will be a focus of many peer reviewers in the coming months, so adequate documentation is key. Accounting firms that have these arrangements in place should review the specific agreements with their clients to ensure compliance with the new rules. In some instances, accounting firms may need to consider exiting these arrangements to ensure that they are independent of their clients. Review of the requirements before the new rule takes effect is key to ensuring independence and compliance with the new rule.
Aaron Kofira is a partner based out of our Rochester, NY office.