After "a healthy debate," the AICPA's Professional Ethics Executive Committee (PEEC) on Aug. 9, 2004 issued an exposure draft that proposes three revisions to rulings in the Institute's Code of Professional Conduct:

  1. Under Rule 102, Integrity and Objectivity, a member would have to inform the client of the use of a third-party service provider prior to sharing confidential client information with that provider. This applies regardless of the location of the service provider (domestic or foreign), and applies when the member (or his/her firm) neither controls (entity) nor employs (individual) the provider.
  2. Under Rules 201, General Standards, and 202, Compliance With Standards, a member using a third-party provider is responsible for all work performed by the provider. This revision would clarify the application of Rules 201 and 202 to members who use a third-party service provider.
  3. Under Rule 301, Confidential Client Information, a member who uses a third-party provider should enter into a contractual agreement with that provider to ensure the confidentiality of client records. This revision would update and broaden the application of the ethics ruling beyond outside tax service bureaus so that it applies to any third-party service provider.

PEEC had formed a task force early in 2004 to explore issues surrounding outsourcing to third-party service providers, in response to discussion and debate by members of Congress, the media, and state and federal regulators about the responsibilities of businesses to disclose to their customers and clients when they outsource service.

AICPA members and other interested parties submitted comments until October 8, 2004. The exposure draft, "Omnibus Proposal of Ethics Division Interpretations and Rulings," is available on the AICPA Website.