Ethics Feed

Definition of ethics

The AICPA, through its committees and staff, interprets and enforces the AICPA Code of Professional Conduct. New ethics interpretations and rulings are promulgated by the AICPA Ethics Division.











3 Steps to Maintain Independence When Preparing Financial Statements

Shutterstock_302730485Consider this scenario: A longtime tax client of yours approaches you. They are interested in starting an online gaming platform with a colleague and have already landed a significant contract. The future of this business appears bright. A local bank has agreed to extend them a $75,000 line of credit, contingent on certain ratios and providing monthly financial statements and copies of all tax filings. You client asks you if you would be interested in performing nonattest services on their behalf. They are looking for a CPA to prepare the new venture’s monthly financial statements for the bank so the bank can monitor compliance with its ratio requirements, while the client maintains the books.

The current loan covenant only calls for a complete set of financial statements, classifying the engagement as a nonattest service. You do not need to be independent to prepare your client’s financial statements, however, based on the new venture’s growth trajectory, you believe that at some point in the future, attest services will likely be needed. Because of this, you decide to take certain steps to maintain your independence in case your client’s needs change, and you are asked to provide a service that requires independence down the road. Below are three steps you take to maintain independence.

Continue reading "3 Steps to Maintain Independence When Preparing Financial Statements" »

The Public Interest: Client Confidentiality Versus Disclosure of an Illegal Act

Muhammad AliThe late Muhammad Ali once said, “Silence is golden when you can’t think of a good answer.” What about when a CPA learns that a client is not complying with laws and regulations? Should the CPA maintain client confidentiality (a paramount pillar of the profession), or disclose information to appropriate authorities in order to protect investors, creditors, employees and even the general public?

In terms of non-compliance, is silence “golden”? Or, is the “good answer” to protect the public by disclosing information that is concealed by the boundaries of the AICPA Code of Professional Conduct (Code)?

Over the next several months, the AICPA Professional Ethics Executive Committee (PEEC) will consider updates to the Code to assist AICPA members in determining the best course of action in such scenarios.

Specifically, the PEEC will consider converging the Code with an April 2016 pronouncement by the International Ethics Standards Board for Professional Accountants (IESBA), which is an independent standard setting body of the International Federation of Accountants (IFAC). The pronouncement provides guidance to professional accountants who encounter non-compliance by a client, employer, those charged with governance, or by management or employees of the client or employer.

Continue reading "The Public Interest: Client Confidentiality Versus Disclosure of an Illegal Act" »

Peer Review Focus on Maintaining Independence

Peer-reviewAs part of its on-going commitment to helping members maintain and enhance audit quality and to improve the consistency of quality across the profession, the AICPA recently launched the Enhancing Audit Quality Initiative. Because of the critical nature of the initiative, the AICPA Peer Review Team will take immediate action on two facets of the initiative: identifying emerging industries and high priority audit areas and applying a combination of outreach, training, and robust peer reviews in these industries and areas.

The Peer Review Team has developed a list of potential “deep dive areas” or emerging industries and risk areas, derived through careful analysis of the following:

Continue reading "Peer Review Focus on Maintaining Independence" »

Decoding the Gray Areas

Ethics-moral-principlesSuppose you are the owner of a convenience store. You purchase newspapers at a fair wholesale price from a man named Harry. Each morning Harry delivers a stack of newspapers to your shop by 6:30 a.m., prior to the morning rush.

At 6:00 a.m. one morning you are walking in your neighborhood and see Harry taking a stack of newspapers from a corner.  Harry places the papers in his backpack and continues on his way.

Soon after, Harry arrives at your shop to make his usual delivery. Should you continue your business with him now that you have observed him taking those newspapers?

Continue reading "Decoding the Gray Areas" »

Why the Revised Ethics Code is So Irresistible

In 2008, the AICPA Professional Ethics Executive Committee and the AICPA Professional Ethics Division undertook a project to update the AICPA Code of Professional Conduct. The new code has been launched this week. Help us spread the news by sharing this infographic!

Continue reading "Why the Revised Ethics Code is So Irresistible" »


Subscribe in a reader

Enter your Email: