Following is a question and answer transcript highlighting some of the frequent inquiries sent to the MACPA Professional Ethics Task Force. Responses to the inquiries have been tailored to specific questions presented and may not consider all of the unique circumstances that are part of an ethical inquiry. Attempt your own answers before reading the “unofficial” opinion of the Task Force.

If a CPA firm doing compilation and review work sets up a separate entity to do payroll work, is there a question of independence?

There are two provisions of the Code of Professional Conduct that must be examined together:

Ethics interpretation Section 101-3 – Performance of non-attest services says a members’ independence would be impaired if the member authorizes payment of client funds, signs or cosigns client checks, maintains a client bank account, has custody of client funds, makes banking decisions on behalf of a client, signs payroll tax returns on behalf of a client or approves vendor invoices for payment.

Ethics interpretation Section 505-2 – Application of rules to members who own a separate business, states in part that a member in the practice of public accounting may own an interest in a separate business that performs for clients any of the professional services of accounting, tax, etc. If the member individually or collectively with his or her firm controls the separate entity, the entity and all of its owners and employees must comply with all of the provisions of the Code of Professional Conduct.

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