AICPA committee updates its conflict-of-interest advice.

• Author: Sawyers, Roby B.

One of the pillars of a member's responsibilities is to maintain objectivity. To do this, the member must avoid conflicts of interest. The term "conflict of interest" refers to a situation in which two or more parties have a competing interest that would make it difficult for the member to fulfill his or her duties fairly. In order to maintain the public trust and promote integrity and objectivity in the delivery of services, a member should be familiar with the conflict-of-interest standards governing the profession and understand how to address these situations when they arise.

The AICPA Tax Practice Responsibilities Committee has updated its Guidelines for Conflicts of Interest in the Performance of Tax Services (the Guidelines) to help members in this regard. (Members can log in to view the Guidelines at tinyurl.com/sh37hy5.) The original Guidelines were published in May 2015 and were limited to conflicts of interest in the performance of federal tax services.The Guidelines were updated in March 2020 to expand the analysis to tax services in general.

This column briefly summarizes the updated Guidelines.

Standards on conflicts of interest

The AICPA Code of Professional Conduct (the AICPA Code) requires that when performing any professional service, a member "shall maintain objectivity and integrity, shall be free of conflicts of interest, and shall not knowingly misrepresent facts or subordinate his or her judgment to others"(ET [section]1.100.001,[paragraph]1).The AICPA Code goes on to explain that in determining whether there is a conflict of interest, a member "should use professional judgment, taking into account whether a reasonable and informed third party who is aware of the relevant information would conclude that a conflict of interest exists" (ET [section]1.110.010, [paragraph]1).

Treasury Circular 230, Regulations Governing Practice Before the Internal Revenue Service (31 C.F.R. Part 10), Section 10.29, "Conflicting Interests," generally prohibits a tax practitioner from representing a client before the IRS if the representation involves a conflict of interest.

The AICPA Code and Circular 230 differ in several ways. First, the AICPA standard is closely related to rules concerning independence, and it refers to the perception of a client, employer, or other appropriate party of the member's impaired objectivity. The Circular 230 rule makes no reference to the perception of others. Second, the AICPA standard expressly encompasses conflicts arising from client relationships with other members of the same firm, while the Circular 230 rule does not. Third, both the AICPA standard and the Circular 230 rule contemplate the waiver of conflicts by affected parties, but only the Circular 230...