Xpitax News Articles
AICPA New Ethics Requirements for Outsourcing as of November 4th, 2004
The AICPA adopted new ethics rules that place new requirements on members who outsource some or all of their work to third party providers. There are two new rules and one revised rule that outline the responsibilities members must meet regarding services that are outsourced to third-party providers.
The new rulings do not differentiate between the type of services outsourced or whether the outsourced services are performed in the United States or in a foreign country. Rather, the rulings provide that if you use a third party provider to help you to service your clients, discloser must to be made to your clients. These new rulings have several effects on the disclosures CPA's make to their clients.
The ruling defines a third party provider as "any entity that the member individually or collectively with his or her firm, does not control (as defined in GAAP) and any individual who is not employed by the member. Examples of third party providers would be the use of per diems, temporary personnel and outside computer professionals and will require disclosure to be made.
Xpitax Comment: This means that any external organization or on-site individual who the firm is not paying as an employee and collecting related payroll taxes for will be considered a third party provider and as such must be disclosed to the client.
New / Revised Rules:
- Notification. Firms must inform their clients, preferably in writing and before providing confidential client information to a third-party, that the firm will be using a third-party's services.
- Responsibility. The AICPA has clarified that members are responsible for all work performed by any service provider.
- Contractual Agreement. Members using third parties must enter into a contractual agreement with the third-party to maintain client confidentiality AND to be reasonably assured the third-party has procedures in place to prevent the unauthorized release of client information.
Effective Dates: Professional services performed on or after July 1, 2005 or as late as December 31, 2005 if a pre-existing agreement is in place.
Xpitax suggests providing a disclosure notice to your client and/or including a disclosure statement in your engagement letter.
If you would like an example of sample language, please call.
Click the following link for the final ethics ruling:
http://www.aicpa.org/members/div/ethics/2004_1028_outsourcing.htm
We encourage you to call with questions!