After the license: the AICPA Code, membership, firm permits and peer review

• Identify the six principles and the main rules of the AICPA Code of Professional Conduct
• Distinguish obligations that come from the license from those that come from AICPA membership
• Describe the UAA firm permit and ownership requirements
• Determine peer review enrollment and due dates for a firm’s first engagement

License and membership are different things

The state board issues the license under its accountancy law. The AICPA is a voluntary membership body. Its Code of Professional Conduct binds AICPA members; the board's rules bind licensees. Most practitioners are subject to both, and the obligations overlap but are not identical. AICPA members, for example, carry the 120-hour per three-year membership CPE requirement in addition to the board's CPE rule.

The AICPA Code: principles and rules

The Code opens with six principles in ET 0.300: Responsibilities (0.300.020), The Public Interest (0.300.030), Integrity (0.300.040), Objectivity and Independence (0.300.050), Due Care (0.300.060) and Scope and Nature of Services (0.300.070). Part 1 applies to members in public practice, Part 2 to members in business and Part 3 to other members.

Core Part 1 rules:

• Integrity and Objectivity (1.100.001): be objective, free of conflicts of interest, and do not knowingly misrepresent facts or subordinate judgment to others.
• Independence (1.200.001): a member in public practice shall be independent as required by standards of bodies designated by Council.
• General Standards (1.300.001): professional competence, due care, planning and supervision, sufficient relevant data.
• Compliance With Standards (1.310.001): comply with standards promulgated by bodies designated by Council.
• Accounting Principles (1.320.001), Acts Discreditable (1.400.001), Contingent Fees (1.510.001), Commissions and Referral Fees (1.520.001), Advertising and Other Forms of Solicitation (1.600.001), Confidential Client Information (1.700.001) and Form of Organization and Name (1.800.001).

The Code overview maps every section, and the nonattest services guide covers the independence questions new practitioners hit first.

Firm permits

UAA Ninth Edition Section 7(a)(1) requires a permit for a firm with an office in the state that performs attest services or uses the title "CPA" or "CPA firm," and for an out-of-state firm performing attest services in the state unless it meets Section 7(a)(1)(C). Section 7(c)(1) requires that a simple majority of the firm's ownership, in financial interests and voting rights, belong to holders of a CPA certificate licensed in some state. Section 6(a) adds that a certificate holder may provide attest services only in a CPA firm holding a permit.

Peer review

UAA Section 7(h) has the board require, as a condition of permit renewal, peer review no more often than once every three years. The AICPA Peer Review Program, as its Questions and Answers describe it, sets the program rules:

• Who enrolls: AICPA members in public accounting must practice in an enrolled firm if the firm's services fall in the scope of the AICPA practice-monitoring standards and it issues reports purporting to follow AICPA professional standards.
• Preparation-only firms: for AICPA membership purposes, a firm that only prepares financial statements under AR-C 70 is not required to enroll. Some boards require enrollment anyway.
• When to enroll: by the report date of the initial engagement. The initial review is ordinarily due 18 months from the date the firm enrolled or should have enrolled, whichever is earlier.
• Later reviews: a subsequent review is ordinarily due three years and six months (42 months) from the year-end of the previous review.

The peer review guide and readiness checklist cover preparation.

Common missteps

• Starting a compilation practice without enrolling in peer review.
• Using "CPA firm" in a name before the firm holds a permit.
• Assuming AICPA membership is required to hold a license, or the reverse.

A new firm’s first permit and peer review dates