Audit AICPA Code of Prof Conduct

AICPA Code of Professional Conduct

Applies to everyone with a CPA license

Sections of code are dependent on what profession CPA is in (members in public practice, members in business, other members retired or not working)

Principles apply to all

Code of Conduct Principles

Responsibilities

Public Interest

Integrity

Objectivity and Independence

Due care

Scope and nature of services

Principles: Responsibilities

in carrying out responsibilities, members should exercise professionalism and moral judgment in all their activities

Principles: Public Interest

Members should accept the obligation to act in a way that will serve the public interest, honor public trust, and demonstrate professionalism

Principles: Integrity

Maintain and broaden public confidence, members should perform all professional responsibilities with highest sense of integrity

Principles: Objectivity and Independence

Maintain objectivity and be free from conflicts in completing responsibilities

Independent in fact and appearance when providing audit and attestation services

Members not in public practice don’t need to be independent

Principles: Due Care

Observe the profession’s technical and ethical standards, strive continually to improve competence and quality of services, discharge professional responsibility to best of member ability

Principle: Scope and Nature of Services

Member in public practice should observe the principles of the Code in determining the scope and nature of services

May be legally able to provide a service, but if you aren’t qualified, don’t provide the service (an audit cpa can legally provide tax services, but might not be the most qualified)

Rules for members of public practice

Integrity and objectivity

Independence

General standards (professional competence, due professional care, planning and supervision, sufficient relevant data)

Compliance with standards

Accounting principles

Acts discreditable

Contingent Fees

Commissions and Referral fees (cannot accept)

Ad and other forms of soliciation (can advertise as long as not misleading)

Confidential client information

Form of organization and name (in most states, over half of the ownership of the firm must be CPAs)

Acts Discreditable

Section 1.4

Don’t do anything that discredits the profession

VA says that a person will not be denied a cpa license solely because of a criminal conviction (will take circumstances into consideration)

Very open to interpretation, varies between states

Contingent Fees

1.51

Cannot have fees determined by the results of service for an attestation service or tax

Consulting services can have contingent fees

Confidential Client Information

1.700

Anything we learn about a client cannot be shared with anybody outside of the company without the client’s explicit permission in writing

Independence Rule

Member in public practice must be independent in performance of professional services

covered members

Financial interests

employment of family members

Loans

Performing other non-audit services

Unpaid fees

Network firms

AICPA Code of Prof Conduct Conceptual Framework Steps

Identify threats

Evaluate significance of threat

Identify and apply safeguards

Evaluate effectiveness of safeguards

Document threats and safeguards

When is conceptual framework used

Used when there is an ethical conflict identified that is not addressed in the rules

AICPA Conceptual Framework Threats to Objectivity/Independence

Adverse interest threat (client wants to sue member)

Advocacy threat (firm acts as registered agent for client)

Familiarity threat

Management particpation threat (member takes on client responsibilities)

Self-interest threat

Self-review threat

Undue influence threat (firm threatened with dismissal)

AICPA Conceptual Framework Safeguards

Eliminate or reduce a threat to an acceptable level

Safeguards include:

Created by professional, legislation, or regulation (ex. training and ethics rules)

Implemented by the audit client (ex. positive tone at top)

Implemented by the audit firm (ex. procedures to implement/monitor quality control)