CEO 85-74 -- October 24, 1985

CONFLICT OF INTEREST

BOARD OF ACCOUNTANCY MEMBER SERVING ON AUDITING STANDARDS BOARD OF NATIONAL PROFESSIONAL ASSOCIATION

To: Mr. Fred Roche, Secretary, Department of Professional Regulation, Tallahassee

SUMMARY:

No prohibited conflict of interest would be created were a member of the Florida Board of Accountancy to serve with compensation on the Auditing Standards Board of the American Institute of Certified Public Accountants. Section 112.313(11), Florida Statutes, would not apply because the Board member would not be an officer, director or administrator of a State or local association. Although the Board has adopted the standards announced by the Institute and the Department of Professional Regulation contracts with the Institute to provide the licensing examination for certified public accountants, no prohibited conflict of interest would be created under Section 112.313(7), Florida Statutes, as the Board and the AICPA both have an interest in the adoption of uniform nationwide standards for auditing and uniform nationwide examinations and as there are no alternatives from which the Board may choose.

QUESTION:

Would a prohibited conflict of interest be created were a member of the Florida Board of Accountancy to serve with compensation on the Auditing Standards Board of the American Institute of Certified Public Accountants, where the Board has adopted the standards announced by the Institute and where the Department of Professional Regulation contracts with the Institute to provide the licensing examination for certified public accountants?

Your question is answered in the negative.

Through your letter of inquiry we are advised that Mr. Louis Dooner has served as a member of the Florida Board of Accountancy since 1979. You also advise that recently he was asked to serve on the Auditing Standards Board of the national professional association, the American Institute of Certified Public Accountants (AICPA). The Auditing Standards Board has been designated to issue pronouncements on professional auditing matters, which are issued in the form of statements on auditing standards.

Section 473.315, Florida Statutes, requires the Board of Accountancy to adopt rules establishing technical standards for the profession, and the Board historically has adopted the statements on auditing standards of the AICPA. Although the Board is not required to adopt the AICPA standards, there are no other nationwide standards in existence.

Members serving on the Auditing Standards Board are informed that they should expect to perform between 600-800 hours of work per year, for which they may request reimbursement of travel expenses and compensation on an hourly basis at a predetermined rate.

In addition, the Department of Professional Regulation contracts with the AICPA to provide the uniform CPA examination to applicants for licensure in this State. Under Section 455.217(1), Florida Statutes, the Department is required to use any national examination which is available and which is approved by the Board. The AICPA examination is the standard professional licensing examination which is used nationwide by all accounting regulatory bodies, and the examination has been used for many years in this State.

The Code of Ethics for Public Officers and Employees provides in relevant part:

PROFESSIONAL AND OCCUPATIONAL LICENSING BOARD MEMBERS. -- No officer, director, or administrator of a Florida state, county, or regional professional or occupational organization or association, while holding such position, shall be eligible to serve as a member of a state examining or licensing board for the profession or occupation. [Section 112.313(11), Florida Statutes (1983).]

It is clear that this provision does not apply here, as the AICPA is a national professional association and not a Florida state, county, or regional professional association. See CEO 83-68. Nor would the subject Board member become an officer, director, or administrator of the Institute by virtue of his service on the Auditing Standards Board of the Institute. See CEO 81-30 and CEO 83-78.

The Code of Ethics also provides:

CONFLICTING EMPLOYMENT OR CONTRACTUAL RELATIONSHIP. -- No public officer or employee of an agency shall have or hold any employment or contractual relationship with any business entity or any agency which is subject to the regulation of, or is doing business with, an agency of which he is an officer or employee . . . ; nor shall an officer or employee of an agency have or hold any employment or contractual relationship that will create a continuing or frequently recurring conflict between his private interests and the performance of his public duties or that would impede the full and faithful discharge of his public duties. [Section 112.313(7)(a), Florida Statutes (1983).]

The first part of this provision prohibits a public officer from having any contractual relationship with a business entity which is doing business with his agency. Although the subject Board member would have a contractual relationship with the AICPA if he receives compensation for his work on the Auditing Standards Board, we find that the AICPA is not doing business with his agency. We previously have found in CEO 80-34 that the "agency" of a board member within the Department of Professional Regulation is the Board on which he serves rather than the Department. Here, you have advised that it is the Department rather than the Board of Accountancy which contracts with the AICPA for licensing examinations.

Nor do we find that the subject Board member's service on the Auditing Standards Board would create a continuing or frequently recurring conflict of interest or would impede the full and faithful discharge of his public duties, in violation of the second part of Section 112.313(7)(a). The Code of Ethics defines "conflict of interest" to mean "a situation in which regard for a private interest tends to lead to disregard of a public duty or interest." Section 112.312(6), Florida Statutes. In our view, service on the Auditing Standards Board will not tend to lead to disregard of the Board member's public duties. Given the nature of the profession being regulated and the historical relationship between the Board of Accountancy and the AICPA, both entities clearly have an interest in the adoption of uniform nationwide standards for auditing and uniform nationwide examinations. In addition, there are no alternatives from which the Board of Accountancy may choose.

Accordingly, we find that no prohibited conflict of interest would be created were the subject Board of Accountancy member to serve with compensation on the Auditing Standards Board of the AICPA.