The AICPA Code of Professional Conduct is a collection of codified statements issued by the American Institute of Certified Public Accountants that outline a CPA's ethical and professional responsibilities.[1] The code establishes standards for auditor independence, integrity and objectivity, responsibilities to clients and colleagues and acts discreditable to the accounting profession. The AICPA is responsible for drafting, revising and reissuing the code annually, on June 1. The current Code is available at the AICPA Web site. For older versions of the Code, see the links below. Show
History[edit]Joseph Edmund Sterrett outlined the debate and issues in setting up a Code of Professional Conduct in his address to the annual meeting of the American Association of Public Accountants in 1907 [2] The earliest "official" version of the code of professional conduct among American accountants was issued by the American Institute of Accountants on April 9, 1917.[3][4] Notable sections[edit]Section 51 - Preamble[edit]The opening principle of the code is that membership, and therefore adherence, to the code is voluntary. This means that an accountant is never under a legal responsibility to adhere to the code, and can renounce the code and membership in the AICPA at any time. Section 101 - Independence[edit]Section 101 sets forth the various requirements to establish auditor independence and conditions that nullify it. Knowingly allowing a member who is not independent to continue to work on an engagement can result in disciplinary action from the AICPA, including possible revocation of the members status as a CPA. Generally, the following actions will impair auditor independence:
Auditor independence is impaired if a member on the engagement team has a direct or material indirect financial interest in the client. Member's on the engagement team are not allowed to be on the board of trustees of a trust that owns, or has committed to owning more than 10% of the client's equity. A member or any of their immediate family are not allowed to own more than 5% of the clients equity. For the period being audited, the auditor is not allowed to operate as an officer, director, manager, promoter, underwriter or voting trustee for the client. If a member leaves the auditing firm and is employed by the client, the entire firms independence is deemed to be impaired. If an audit member is made a job offer by the client and does not immediately report and remove themselves from the engagement, their independence is impaired. However, if the member does report the job offer and rejects it, and is no longer being considered for a position with the client, then their independence is not impaired. When the auditing member has a previous employment relationship with the client, barring certain exceptions, the auditor is required to liquidate any employee welfare programs that they have vested benefits in and collect or pay any loans outstanding to the client. The immediate family of the auditor is considered part of the test for impairment of independence. The exception to this is that the immediate family members of auditors are allowed to work for the client in non-management roles. If the auditor provides non-attest services such as tax support or consulting, they are required to adhere to the independence requirements of other regulatory bodies that govern those services. Failure to do so will impair their independence for their audit engagement as well. List of AICPA Code of Conduct and by-laws sections from AICPA Professional standards, 1974-2007[edit]
List of AICPA Code of Conduct and By-Laws Sections published as pamphlets, 1917-1997[edit]
References[edit]
What is a discreditable act to the profession?In Brief. Acts considered “discreditable to the profession” are those that bring harm to one's reputation or that of the profession.
Which of the following is least likely to be considered an act discreditable to the accounting profession?Numerous moving traffic violations would most likely NOT be considered an "act discreditable to the profession". Traffic violations will not affect the reputation of the professional activities carried out by the accountant.
Which section of the professional standards indicates that the CPA might violate the acts discreditable rule?Section 270: Acts discreditable / Professional behaviour / Confidentiality.
Who must comply with the AICPA Code of Professional Conduct?1. Whom does the Code of Professional Conduct govern? Bylaw section 230 explains that the Code applies to all individuals that are members of the American Institute of Certified Public Accountants.
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