Ethics and Professional Conduct for a CPA
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Whether you’re a seasoned accountant, a newly licensed certified public accountant, or CPA, or even just thinking about a career preparing taxes and financial statements for clients – you should become acquainted with the American Institute of CPAs, or AICPA, Code of Professional Conduct. The code provides the minimum ethical standards you need to practice on a daily basis to avoid penalties and disciplinary action.
Understanding The Code
The AICPA Code of Professional Conduct provides the ethical framework for accountants and includes four core components: Principles, Rules, Interpretations and Ethics Rulings. The Rules, which are short statements that resemble a legal code, provide the minimum ethics standards that CPAs must meet. Only these Rules are enforceable against CPAs, but the Principles provide all accountants with more detailed guidance; they elaborate on the applicability of the Rules. Subordinate to Rules and Principles are Interpretations, which provide accepted scope limitations for Rules. Ethics Rulings provide summaries of prior investigations by the AICPA and state societies.
Core Accountant Ethics
With the goal of maintaining the public’s trust in CPAs, the Code guides accountants in conducting themselves in ways that protect the profession’s integrity. One significant ethical point in the Code prevents CPAs from working for individual and business clients that present a conflict of interest or that compromise independence. For example, an accountant who considers auditing the financial statements of a Fortune 500 company in which he holds a substantial stock investment presents a situation where independence and conflict of interest issues can arise. The Code provides more detail about when a CPA is responsible for removing herself from the engagement. Another example of an ethical requirement of the Code requires a CPA to be competent in the work he does, such as knowing when an engagement is beyond his area of expertise, a situatiion when it becomes irresponsible to provide the services and to ensure compliance with generally accepted accounting principles.
A significant portion of the Code aims to protect a CPA’s current and prospective clients from unethical behavior. The Code’s rules cover issues like a CPS's obligation to keep client information confidential and restrictions on charging clients contingency fees. It also provides guidance on appropriate ways of advertising CPA services to avoid misleading the public.
Violating The Code
Whether you’re a member of the AICPA, a state CPA society, or both, it’s likely that you’ll be subject to the same Code. Ethics violation investigations are handled through the Joint Ethics Enforcement Program, or JEEP – a collaborative program between states and the AICPA. If you’re ever accused of an ethics violation, you will receive notification of it through the mail and information regarding the investigation that will ensue. It depends on the specific violation, but the outcome of an investigation can range from dismissal of the complaint, the imposition of penalties, such as having to take courses, admonishment and temporary revocation of your membership. For more severe violations, however, you risk losing membership privileges permanently and even your CPA license.
Michael Marz has worked in the financial sector since 2002, specializing in wealth and estate planning. After spending six years working for a large investment bank and an accounting firm, Marz is now self-employed as a consultant, focusing on complex estate and gift tax compliance and planning.