Baker Tilly comment letter to the PEEC on NOCLAR

May 15, 2017

Ms. Lisa Snyder

Director of the Professional Ethics Division American Institute of Certified Public Accountants

Via email: lsnyder@aicpa.org

Re: Proposed Interpretations: Responding to Non-compliance with Laws and Regulations, issued March 10, 2017

Dear Ms. Snyder:

We appreciate the opportunity to comment to the Professional Ethics Executive Committee (PEEC) on the Proposed Interpretations related to a member’s responsibility with respect to discovery of noncompliance with laws and regulations (NOCLAR) during the conduct of professional services. We understand that the proposed interpretation was drafted in part to align US ethical standards with International ethical standards. We commend the PEEC for its continuing efforts to converge ethical standards globally, while understanding that the practice environment in the US is substantially different than internationally and certain differences from the IESBA guidance are necessary. Our comments below will address certain observations and suggestions that we believe could improve the “usability” of the guidance.

By way of background, Baker Tilly Virchow Krause, LLP, is a large nationally recognized accounting firm operating primarily in the Midwest and Northeast sections of the United States. We have approximately 300 partners and employ approximately 2,500 persons. Our practice is diverse, offering accounting and auditing services as well as tax and consulting services across a broad spectrum of industries and geographies.

Response to questions:

1. We believe that members should be required to document certain aspects of NOCLAR, in keeping with the overarching principle in the Code of Conduct to operate in the public interest. Requiring members to document items related to NOCLAR, we believe will encourage better compliance with the  interpretation and lead to better information for the clients.
2. We believe a one year transition period is adequate for the application of the interpretation.

Specific comments and observations:

We will limit our comments to Section 1.170 applicable to members in public practice.

In general we agree with the concepts in 1.170 as in many instances they reflect requirements in the audit standards and elsewhere. Our comments are in the nature of improving the clarity of the requirements in order to avoid confusion about the applicability of the ET versus other standards. We also strongly agree with the guidance in 1.170.0103, which reinforces the member’s responsibility as to the Confidential Client Information Rule. Specific suggestions follow: