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 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 ktruman@aicpa.org 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.

 

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What We’ve Uncovered… About the Risk Assessment Standards

When performing peer reviews, reviewers document the areas in which firms struggle to comply with professional standards. The AICPA Peer Review Team compiles and periodically communicates these common areas of noncompliance so that other firms won’t make the same mistakes. This is just one of the many ways in which peer review benefits the profession.

Over the past few months, peer reviewers have reported that firms failed to properly assess risk and properly document IT risk assessments. Some of the most common areas of noncompliance with the risk assessment standards are listed below, along with some advice to help your firm prevent the same mistakes.

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Tomorrow's Company and the Ethics of Culture Change

Better-place-signRecently a colleague of mine attended a Tomorrow’s Company lecture in London as a guest of CIMA. Tomorrow’s Company is a London-based think tank that offers lectures and publications on issues like leadership and talent, sustainability and governance. CIMA, as a corporate member of Tomorrow’s Company, sponsors some lectures, as they did on this particular evening. The lecture she attended was given by Dick Olver, Chairman of BAE Systems, one of the world’s largest defense contractors.

Dick’s lecture was titled "A journey of culture change" and centered around his organization’s successful efforts in the area of ethics. With Dick’s appointment as chairman, he ushered in a complete overhaul of the company’s culture. He said, “The culture we’ve tried to develop is one in which our people take the company’s core ethical values into account in every decision they take. One where doing the right thing becomes an almost subconscious response.”

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Crossing the Finish Line with Circular 230

Tax Ethics and Horses

OK, raise your hand if you have that Circular 230 legend at the bottom of all your emails.  Great – now keep your hand up if you know why.  Not to worry – most of us are in the same boat.  So why the question now?  Here’s the story . . .

If you do any kind of tax work, I hope you're familiar with the AICPA’s Statements on Standards for Tax Services.  And if that work involves any kind of federal filing or representation, you'll also need to be familiar with Treasury Department Circular No. 230

Horse-raceCircular 230 isn’t new - its roots go back to the Civil War. The post-Civil War Congress enacted legislation that gave citizens the authority to make claims with the Treasury Department for the value of horses and other property lost during the war.  It soon became evident that more claims had been submitted than horses lost.  On July 7, 1884, President Chester Arthur signed what became known as the Horse Act, giving Treasury the authority to regulate the admission of representatives of claimants before them and to take related disciplinary action.  Eventually, the Horse Act led to the system we have today in which licensed CPAs are automatically admitted to represent taxpayers to the IRS with full practice rights.

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Confronting Subordination of Judgment Issues Without Compromising Your Ethics

Pensive-womanAs CPAs, we are increasingly called upon to use our professional judgment in facing key auditing, tax and accounting concerns – especially as the profession moves from being rules-based to more principles-based. We gain our ability to apply professional judgment over time, through experience, training and an understanding of what a reasonable person would perceive as the right course of action under certain circumstances. We are informed by our upbringing, by the guidance of our mentors and colleagues, and during interactions with our employers and clients.

At some point during our careers our professional judgment is likely to be tested.

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Top 5 Ethics Resources

With the importance of ethics and non-financial reporting rising on the global agenda, accounting professionals are in a unique position to make an important contribution to creating a sustainable ethical operating environment. The AICPA and CIMA have developed a number of resources to assist CPA, CGMAs in guiding their organizations to long-term sustainability and success, but these resources shed light on the challenges many CPA business clients face, and so apply to CPAs in a firm setting as well.

Here are our top five.

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Fostering a More Ethical Business Culture

CGMA logoA few weeks ago, I shared with you my (reasonable and totally understandable) enjoyment of data points and survey results in all their shapes and sizes. I have also always been a huge fan of The Ethicist column in the New York Times Magazine, and put serving as ‘The Ethicist’ near the top of my dream jobs list. Needless to say, the recent results of the global business ethics survey from the AICPA and the Chartered Institute of Management Accountants were right in my wheelhouse.

It’s encouraging to see that four out of five businesses worldwide report that they have committed to ethical performance. But according to Managing Responsible Business, a global survey of almost 2,000 CGMAs, the rhetoric does not always match the reality. While 80 percent of organizations provide a code of ethics to employees, only 36 percent collect ethics information such as the number of employees attending ethics training and actions taken on hotline reports. The report suggests that companies need better processes to really operationalize their ethics programs.

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Doing the Right Thing…When Tax Ethics Get Murky

Dictionary_definition_ethicsI often get phone calls from members who are troubled by a professional ethics issue. “Ed, I have a conflict with a client; I don’t trust him.” Or, “I just engaged with a new client and I suspect the old accountant of doing something wrong; should I turn her in?”  The scenarios change but in the end, they always ask: “What should I do?”  And I always tell them: “I can’t tell you what to do!”  Really, it comes down to a matter of ethics and who am I to tell someone how to behave?

Over the years, while teaching classes on subjects like the AICPA’s enforceable tax ethics, the Statements on Standards for Tax Services, or the Internal Revenue Services’ Circular 230, I often ask the participants to define ethics.  “Guided by a code of conduct,”  “acting with integrity,” “having a moral code,” “moral principles that govern a person’s behavior,” or “living your life with high values” are examples of what I’ve heard.  The definition that resonates best with me is “doing the right thing.” 

Continue reading "Doing the Right Thing…When Tax Ethics Get Murky" »

AICPA Unveiling Easy-to-Read Code of Professional Conduct

Dictionary_definition_ethicsThree years ago the AICPA’s Professional Ethics Division embarked on a new project aimed at restructuring the AICPA’s Code of Professional Conduct into a logically structured, topical format. The concern was that the Code of Professional Conduct could at times be difficult to navigate as many provisions were scattered throughout and didn’t follow an intuitive order. The Ethics Codification Project, as it has been dubbed, also provides an opportunity to evaluate any guidance that lies outside the Code of Professional Conduct and determine whether to propose that some of it be made authoritative.

The Professional Ethics Division and Professional Ethics Executive Committee also continues to work on converging the AICPA’s Code of Professional Conduct with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants. A requirement to being a member of the International Federation of Accountants is that no member body should have standards that are less restrictive than the IESBA’s Code. As the Ethics Codification Project continues, the PEEC will consider those standards that need to be changed to meet the minimum IESBA standard. Convergence is not expected to lower standards, but rather where appropriate, make standards more robust or provide guidance where guidance is lacking.

Ultimately these projects will create a user-friendly and intuitively arranged Code of Professional Conduct. Additionally, we expect the codification will be available in a web-based platform, which further enhance the quality and ease of use to the Code of Professional Conduct, as well as allow users to browse by topic and perform searches on specific information.

This is a long-term project though, so don’t expect to see the updated Code of Professional Conduct immediately. In fact, we don’t expect to see an exposure draft until the Spring of 2012 with approval and issuance estimated one year later in the Spring of 2013. For the time-being, convergence changes are being exposed for comment and the latest version of the Code of Professional Conduct can always be found on AICPA.org.

Ellen Goria, CPA, Senior Manager - Professional Ethics Division, American Institute of CPAs. Ellen staffs various task forces that develop independence and behavioral guidance for exposure to membership. She also assists with interpreting the Institute’s Code of Professional Conduct by providing guidance to membership, state CPA societies and other interested parties on ethics and independence issues. In her role, Ellen also works closely with other AICPA teams to ensure publications accurately reflect the AICPA’s current ethical positions.

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