Last year the AICPA issued ethics guidance to CPAs who handle PPP loan application and forgiveness applications for their business clients. This has become a significant issue for me lately. The guidance reminds practitioners that assisting the client in this capacity is considered a nonattest service requiring application of the independence and related rules in the Code of Professional Conduct. See ET 1.295, especially 1.295.040, General Requirements if the accountant later issues an audit, review or compilation report. The second round of PPP this year significantly changed the program. My information comes partly from a podcast published by the Journal of Accountancy.
Three general points of the guidance apply to my work:
1) If the CPA handles the entire PPP application or forgiveness application (as I usually do), independence is impaired. That same CPA could not then provide an audit or review. But that is seldom a concern with the small business clients I handle. They are far more concerned with getting management help than worrying about the remote possibility of a future financial statement audit requirement.
2) Taking custody of client payroll records for PPP (as I do) raises the issue of security and privacy. I use a secure document portal that meets all requirements and all but one of the banks we’ve worked with use a similarly secure system. For the one bank’s third party PPP loan contractor that did not meet security requirement – they used email – I documented the bank’s procedure and obtained permission from the business client to transmit sensitive documents via email. Interestingly, that same bank processor had the most difficulty in other matters as well.
3) The guidance addresses the question of whether being compensated as a percentage of the loan proceeds creates a prohibited contingent fee arrangement. Since the government is determining the amount of the loan, the AICPA indicated that this arrangement is allowed. I normally use a small fixed fee now but I waived all fees entirely during the first round of PPP loan applications primarily because clients did not have the free cash flow to pay anyway. I typically delay sending the invoice until after the loan proceeds are received to ensure that the client has the cash available to pay.