STATEMENT ON STANDARDS FOR CONSULTING SERVICES

The AICPA Management Consulting Services Executive Group, the Institute’s top technical committee responsible in issuing pronouncements on consulting services, issues Statements on Standards for Consulting Services. Under the “Compliance with Standards Rule” (ET sec. 1.310.001) of the Institute’s Code of Professional Conduct, the AICPA Management Consulting Services Executive Committee has been designated as a body to create professional standards (code). Members must be able to defend any deviations from this statement.

CS Section 100: Consulting Services: Definitions and Standards

Source: Statement on Standards for Consulting Services No. 1

Unless otherwise stated, this policy applies to engagements taken on or after January 1, 1992.

Introduction

01: CPAs’ consulting services to their clients have developed beyond accounting-related advice to a broad range of services incorporating a variety of technical disciplines, industry knowledge, and consulting abilities. The majority of practitioners, including those who perform audits and taxes, also offer business and management consultancy to their customers.

.02: Consulting services are significantly different from the CPA’s role of attesting to other people’s claims. The practitioner makes a judgment about the veracity of a written claim that is the duty of another party, the asserter, in an attest service. The practitioner develops the findings, conclusions, and suggestions offered in a consulting service. The type and scope of work are exclusively established by the practitioner’s and client’s agreement. In most cases, the job is done solely for the client’s use and benefit.

.03: Management consulting services, management advisory services, business advisory services, and management services have all been terms used to describe CPA consulting services in the past. The AICPA previously produced a series of Statements on Standards for Management Advisory Services (SSMASs) that gave guidelines on specific types of consulting services provided by members. The SSMASs are superseded by this Statement on Standards for Consulting Services (SSCS), which establishes practice standards for a larger range of professional services, as detailed in paragraph.05.

.04: Any AICPA member holding out as a CPA while providing consulting services as specified above is subject to this SSCS and any subsequent SSCSs.

Definitions

The following terms have been established for the purpose of SSCSs:

Consulting services practitioner. Any AICPA member holding out as a CPA while engaged in the performance of a Consulting Service for a client, or any other individual who is carrying out a Consulting Service for a client on behalf of any Institute member or member’s firm holding out as a CPA.

Consulting process. The analytical approach and process applied in a Consulting Service. It typically involves some combination of activities relating to determination of client objective, fact-finding, definition of the problems or opportunities, evaluation of alternatives, formulation of proposed action, communication of results, implementation, and follow-up.

Consulting services. Professional services that employ the practitioner’s technical skills, education, observations, experiences, and knowledge of the consulting process. Consulting services may include one or more of the following:

  1. Consultations, in which the practitioner’s function is to provide counsel in a short time frame, based mostly, if not entirely, on existing personal knowledge about the client, the circumstances, the technical matters involved, client representations, and the mutual intent of the parties. Examples of consultations are reviewing and commenting on a client-prepared business plan and suggesting computer software for further client investigation.
  2. Advisory services, in which the practitioner’s function is to develop findings, conclusions, and recommendations for client consideration and decision making. Examples of advisory services are an operational review and improvement study, analysis of an accounting system, assistance with strategic planning, and definition of requirements for an information system.
  3. Implementation services, in which the practitioner’s function is to put an action plan into effect. Client personnel and resources may be pooled with the practitioner’s to accomplish the implementation objectives. The practitioner is responsible to the client for the conduct and management of engagement activities. Examples of implementation services are providing computer system installation and support, executing steps to improve productivity, and assisting with the merger of organizations.
  4. Transaction services, in which the practitioner’s function is to provide services related to a specific client transaction, generally with a third party. Examples of transaction services are insolvency services, valuation services, preparation of information for obtaining financing, analysis of a potential merger or acquisition, and litigation services.
  5. Staff and other support services, in which the practitioner’s function is to provide appropriate staff and possibly other support to perform tasks specified by the client. The staff provided will be directed by the client as circumstances require. Examples of staff and other support services are data processing facilities management, computer programming, bankruptcy trusteeship, and controllership activities.
  6. Product services, in which the practitioner’s function is to provide the client with a product and associated professional services in support of the installation, use, or maintenance of the product. Examples of product services are the sale and delivery of packaged training programs, the sale and implementation of computer software, and the sale and installation of systems development methodologies.
Standards for Consulting Services

.06: The “General Standards Rule” in the code (ET sec. 1.300.001 and 2.300.001) contains the profession’s general standards, which apply to all services provided by members. The following are the details:

  • Professional competence. Only engage in professional services that the member or his or her firm may reasonably anticipate to be executed competently.
  • Due professional care. When providing professional services, exercise necessary professional caution.
  • Planning and supervision. Plan and monitor the delivery of professional services properly.
  • Sufficient relevant data. Obtain enough relevant data to provide a reasonable basis for any professional services rendered judgments or recommendations.

.07: The following extra general criteria for all consulting services are published to meet the unique character of consulting services, in which the practitioner’s delivery of services may be limited by the client’s comprehension. The “Compliance with Standards Rule” of the code (ET sec. 1.310.001 and 2.310.001) establishes the following standards:

  • Client interest. Serve the customer’s interests by attempting to achieve the goals set forth in the agreement with the client while retaining impartiality and integrity.
  • Understanding with client. Establish a written or spoken understanding with the client regarding the parties’ duties and the nature, extent, and restrictions of services to be delivered, and modify the understanding if circumstances change significantly throughout the engagement.
  • Communication with client. Inform the client of (a) potential conflicts of interest under the code’s “Integrity and Objectivity Rule” (ET secs. 1.100.001 and 2.100.001), (b) serious misgivings about the scope or advantages of the engagement, and (c) significant engagement findings or occurrences.

.08: Because the oral or written arrangement with the client may define restrictions within which services are to be supplied, professional judgment must be utilized while adopting Statements on Standards for Consulting Services in a specific situation. For example, the practitioner’s effort in acquiring relevant data may be limited as a result of their agreement with the client. When the agreed-upon scope of services includes such limitations, the practitioner is not compelled to decline or withdraw from a consulting arrangement.

Consulting Services for Attest Clients

.09: The provision of consultancy services to an attest customer has no bearing on one’s independence. Members and their businesses conducting attest services for a client, on the other hand, must adhere to applicable independence standards, rules, and regulations established by the AICPA, state boards of accountancy, state CPA societies, and other regulatory bodies.

Effective Date

.10: This provision applies to contracts signed on or after January 1, 1992. It is allowed to apply the provisions of this section early.

[Revised, January 2015, to reflect the revised Code of Professional Conduct.]
  1. Other AICPA professional standards apply to these services, including Statements on Auditing Standards (SASs), Statements on Standards for Attestation Engagements (SSAEs), and Statements on Standards for Accounting and Review Services (SSARS) (SSARSs). (These excluded services may be provided in conjunction with consulting services, but only consulting services are subject to the SSCS.)
  2. Engagements involving the preparation of written reports or the provision of oral advice on the application of accounting principles to specified transactions or events, either completed or proposed, and the reporting thereof, or situations involving the preparation of written reports or the provision of oral advice on the application of accounting principles to specified transactions or events, either completed or proposed, and the reporting thereof.
  3. As a direct result of observations made while providing the excluded services, recommendations and comments were prepared during the same engagement.

Integrity is defined as follows in “Integrity” (ET sec. 0.300.040): “Within the confines of client confidentiality, integrity demands a member to be, among other things, honest and transparent. Personal gain and benefit should not take precedence over public service and public trust. Integrity can accept an honest difference of opinion and an unintended error; it cannot accept deception or principle subordination.”

Objectivity and independence are distinguished in “Objectivity and Independence” (ET sec. 0.300.050) as follows: ” “bjectivity is a quality that adds value to a member’s services. It is a state of mind. It is one of the profession’s distinguishing characteristics. The need to be impartial, intellectually honest, and devoid of conflicts of interest is imposed by the notion of objectivity. Independence precludes relationships that may appear to impair a member’s objectivity in rendering attestation services.”

Part of the “Conflict of Interest Rule” (ET sec. 1.110.010) is as follows:

A conflict of interest may arise if a member or the member’s firm has a relationship with another person, entity, product, or service that the client or other suitable parties may see as affecting the member’s neutrality in the member’s professional judgment…

A member may render a professional service if he or she determines that the service may be conducted objectively because the hazards are minor or can be minimized to an acceptable level by using precautions…

The AICPA’s independence standards apply exclusively to attestation services; the objectivity standards apply to all services.