3 Things to Know About Proposed Ethics Code Revisions
CPAs know how seriously our profession takes ethics. The AICPA’s Code of Professional Conduct applies to all AICPA members. In addition, many state CPA societies and state boards of accountancy either incorporate it by reference or use it as a starting point for their codes. The Code of Professional Conduct provides guidance on areas such as client relationships, maintaining independence and adhering to the technical standards of GAAP, GAAS and others.
The AICPA's Professional Ethics Division acts as the steward of the Code of Professional Conduct, taking a 360 degree view of ethics. It publishes a free newsletter, Ethically Speaking, which helps CPAs better understand ethics-related issues (send an email to email@example.com to subscribe). The Professional Ethics Division establishes, interprets and enforces these standards. To carry out its charge, the Professional Ethics Division provides a hotline that helps members understand and apply the Code of Professional Conduct properly. What’s more, monitoring hotline inquiries is one of the ways the Professional Ethics Division identifies topics that require standard setting. Using this real-time feedback, the Professional Ethics Division has been able to tackle topics that are important to the profession.
The latest exposure draft issued by the Professional Ethics Division reorganizes the Code of Professional Conduct to make it easier to navigate, understand and apply. Watch this video to learn more about the Ethics Codification project.
What started out as eight rules that fit on one sheet of paper has evolved and expanded to match the complexity of the profession and modern business over the last nearly 100 years. It was time for a reorganization of the Code of Professional Conduct, so the Professional Ethics Division has made sure the new provisions:
- Make navigation easier. The Code of Professional Conduct is now topically organized (versus by rule). The reorganized Code of Professional Conduct was restructured into several parts by line of business so that you need to look only at the part that is applicable to you. Each part is then organized by topic and where necessary, sub-topic or section, making research easier. Part 1 contains the rules of conduct and interpretations that are applicable to members in public practice, Part 2 pertains to members in business and Part 3 pertains to all other members.
- Incorporate two conceptual frameworks: one for individuals in public practice and another for those in business. These two conceptual frameworks were structured after a non-authoritative document, Guide for Complying with Rules 102 – 505, and an authoritative document, Conceptual Framework for AICPA Independence Standards. While these frameworks are technically new to the Code of Professional Conduct, they represent concepts for which many practitioners are likely already familiar.
- Highlight non-authoritative guidance and enhance clarity. The proposed revised Code of Professional Conduct highlights non-authoritative guidance issued by the Professional Ethics Division (such as basis for conclusion documents and frequently asked questions) and recasts the existing content using consistent wording conventions and styles, yet it retains the substance of the existing standards.
Would you like to learn more about the new codification or connect with your peers about ethics? Participate in this year’s annual ethics update webcast, Know Where the Ethical Speed Bumps Are, taking place 1 to 3 p.m. ET on June 27. You may also be interested in joining the AICPA’s Professional Ethics Division LinkedIn subgroup, which is an easy way for group members to stay abreast of trends.
Ellen T. Goria, CPA (NY), Senior Manager Independence & Special Projects – Professional Ethics, American Institute of CPAs. Ellen staffs various task forces that develop independence and behavioral guidance for exposure to membership. She assists with interpreting the AICPA’s Code of Professional Conduct by providing guidance to membership, state CPA societies, and other interested parties on ethics and independence issues. In addition, Ellen consults on independence and behavioral case investigations conducted by members of her team.