1.02 STUDENT NOTES TO STUDY FOR TEST
I.
The AICPA Code of Professional Conduct
A. Principles – provide ideal standards of professional conduct; not enforceable against AICPA
members
B. Ethical Principles
1. Responsibilities – exercise sensitive and professional moral judgments
2. Public Interest – serve the public interest, honor public trust, and demonstrate
commitment to the profession
3. Integrity – perform professional responsibilities with the highest sense of integrity
4. Objectivity and Independence – be independent in fact and appearance in providing
auditing or other attestation services
5. Due Care – observe technical and ethical standards, improve competence, and perform
to the best of your ability
6. Scope and Nature of Services – follow Code of Professional Conduct in determining
scope and nature of services
C. Rules – represent minimum standards of ethical conduct; enforceable against AICPA
members
D. Interpretations of Rules of Conduct
1. Published by AICPA’s Division of Professional Ethics
2. Used when practitioners have frequent questions
3. May be used by a practitioner to justify a departure
E. Ethical Rulings
1. Published explanations and answers to questions about rules of conduct
2. Submitted to the AICPA by practitioners and others interested in ethical requirements
II.
Specific Rules of Conduct
A. Independence – a member in public practice shall be independent in the performance of
professional services as required by the standards
1. Financial interest in client
2. Immediate family
3. Former practitioners
4. Normal lending procedures
5. Joint relationship with client investor
6. Joint relationship with client investee
7. Director, officer, manager, or employee
8. Litigation between CPA firm and client
9. Bookkeeping services
10. Consulting and other nonaudit services
11. Unpaid fees
B. Integrity and Objectivity – member shall be free of conflicts of interest, shall not knowingly
misrepresent facts or subordinate his or her judgment to others
C. General Standards – member shall comply with the following standards:
1. Professional competence – undertake only those professional services that can be
completed with professional competence
2. Due professional care – exercise due professional care in the performance of
professional services
3. Planning and supervision – adequately plan and supervise the performance of
professional services
4. Sufficient relevant data – obtain sufficient, relevant data to provide a reasonable basis for
conclusions and recommendations
D. Compliance with Standards – must comply with the following standards:
1. Auditing Standards and PCAOB Standards
2. Statements on Accounting and Review Services
3. Statements on Standards for Attestation Engagements
4. Management Consulting Services Standards
E. Accounting Principles
1. GAAP is considered to be any statement proclaimed by an authoritative body designated
by the AICPA
2. CPAs must justify any departure from GAAP
3. Departure from GAAP is permitted IF following GAAP would make statements
misleading
F. Confidential Client Information – may not disclose any confidential client information without
the specific consent of the client. Exceptions are:
1. Subpoenas or summons enforceable by a court order
2. Review of papers related to an ethics division inquiry
3. Review of papers related to a peer review
4. Obligations related to technical standards
G. Contingent Fees
1. Fees to be determined upon a particular result
2. CPAs are forbidden to accept contingent fees for attestation services and tax return
preparation
H. Acts Discreditable
1. Retaining client records after they have been requested
2. Discrimination or harassment in employment practices
3. Noncompliance with standards
4. Negligence in the preparation of financial statements or reports
5. Solicitation or disclosure of CPA exam questions and answers
6. Failure to file a tax return or pay tax liability
Advertising and other forms of solicitation – false, misleading, or deceptive advertising is prohibited.
Examples of unacceptable advertising are:
7. Creates false or unjustified expectation of favorable results
8. Implies the ability to influence any court or similar body or official
9. Client is unaware that there is a likely chance that a stated fee will be substantially
increased
10. Other representations that are likely to cause a reasonable person to misunderstand or
be deceived.
I. Commissions and Referral Fees – compensation paid for recommending a third party’s
product or service to a client or recommending a client’s product or service to a third party.
Prohibited if the firm also performs:
1. Audit or review of financial statement for the client
2. Compilation of financials in which lack of independence is not disclosed and the
financials may be used by a third party
3. Examination of prospective financial information
J. Form of Organization and Name
1. Member may practice public accounting only in a form of organization permitted by state
law
2. CPA shall not practice public accounting under a firm name that is misleading
3. Ownership of CPA firms by non-CPAs is allowed under certain conditions
4. Firm may not designate itself as a member of the AICPA unless all CPA owners are
members of the AICPA
5.
III. Enforcement of Policies – principally involves the following groups:
A. State Boards of Accountancy – can revoke CPA certificate of license to practice
B. AICPA Joint Trial Board – can suspend or expel members from the AICPA; less serious and
unintentional violations will normally require only corrective and remedial action
UNPACKED CONTENT
I.
II.
Ethical Principles in the AICPA Code of Professional Conduct
A. Responsibilities
B. Public Interest
C. Integrity
D. Objectivity and Independence
E. Due Care
F. Scope and Nature of Services
Specific Rules of Conduct
A. Independence
B. Integrity and Objectivity
C. General Standards
D. Compliance with Standards
E. Accounting Principles
F. Confidential Client Information
G. Contingent Fees
H. Acts Discreditable
I.
Advertising and Other Forms of Solicitation
J. Commissions and Referral Fees
Form of Organization and Name