week 5 Assignment

ACCT525

Week 5 Assignment

Read the AICPA Code of Professional Conduct using the below link. In 3-4 pages (12-pt type, double-

spaced), summarize the following sections of the Code:

Introduction

Section 50 – Principles of Professional Conduct

Section 90 – Rules: Applicability and Definitions

Section 100 – Independence, Integrity and Objectivity

Section 200 – General Standards Accounting Principles

Section 300 – Responsibilities to Clients

Section 400 – Responsibilities to Colleagues

Section 500 – Other Responsibilities and Practices

Here is a link to the Code:

http://www.aicpa.org/RESEARCH/STANDARDS/CODEOFCONDUCT/Pages/default.aspx.

Introduction

The AICPA’s Code of Professional Conduct consists of two sections viz. Principles and Rules. The Principles section outlines the necessary framework for the Rules section which is used for governing professional performance of the members. This code was adopted in order to provide rules and guidance to all the professional members including all those who are either in government or public practice, industry or education. Compliance with it depends on the understanding of the members, voluntary actions, and reinforcement by public opinion and peers and in some case on disciplinary proceedings.

• Section 50 – Principles of Professional Conduct

Section 50 covers Section 51-57. Section 51 gives the preamble of Section 50 which states that AICPA membership is voluntary and once registered; it becomes obligatory for the members to have self-discipline even beyond the law and recognize their professional responsibilities towards their client, colleagues and the public. According to Section 52, members of AICPA shall exercise moral and professional judgments in all aspects of their professional activities. Section 53 requires members to act in public interest honoring their trust on them. Section 54 states that members shall maintain highest integrity in all their activities and try to broaden the confidence of public. Under Section 55, it is required for a member to be independent and free of interest conflicts in discharging his responsibilities. Section 56 requires members to exercise due care in discharging their services. And according to section 57, a member shall determine the nature and scope of his services by observing the principles section of the code.

• Section 90 – Rules: Applicability and Definitions

Section 90 covers Section 91 and 92. While Section 91 provides the applicability criteria, section 92 gives definitions for various terms used in the code. For the purpose of this section, an international associate of the AICPA and an associated member are also covered under the definition of member. This section requires all the members to adhere to the Rules of the code except in 4 cases:

a) When a foreign component auditor who is a member of a group engagement team departs from the discipline but his conduct is in accordance with the independence and ethical requirements of Code of Ethics for Professional Accountants by International Ethics Standards Board for Accountants (IESBA), then a member of such a group engagement team will not be subject to the discipline,

b) If a member practices outside US and his conducts are in accordance with the rules of that country’s organized accounting profession, then he will not be subject to the discipline,

c) When a firm within a network is located outside US and departs from the discipline but its conduct is in accordance with the independence and ethical requirements of Code of Ethics for Professional Accountants by International Ethics Standards Board for Accountants (IESBA), then a member of such a network firm will not be subject to the discipline and,

d) When rules themselves indicate so.

This section also restricts a member to permit a person to perform such acts on his behalf that if performed by the member himself would be recognized as violation of rules.

• Section 100 – Independence, Integrity and Objectivity

This section provides conceptual framework for AICPA Independence, Integrity and Objectivity standards. It consists of three sections viz. ET Section 101, ET Section 102 and ET Section 191. Section 101 gives the Independence standards and its various interpretations like effect on independency when the member takes loan from a financial institution which is his client etc. Section 102 gives interpretations regarding Integrity and Objectivity of the members like conflicts of Interest (Sec. 102-2), member’s obligation towards the external accountant of his employer (Sec. 102-3) etc. Lastly, Section 191 gives the ethical rules regarding Independence, Integrity and Objectivity for a member.

• Section 200 – General Standards Accounting Principles

This section consists of subsections 201, 202, 203 and 291. Section 201 gives competence standards for a member which require a member to have professional competence, adequately plan, supervise and perform his professional responsibilities with due care and must obtain sufficient relevant data to make reasonable conclusions on that basis. Section 202 requires a member to comply with all the standards while performing his professional services. Section 203 restricts a member to express an affirmative opinion on financial statements of his clients or to state that he is unaware of required modifications in the financial statements so that they confirm with the generally accepted accounting principles when the case is no so i.e. the data or such statements depart from the accounting principles. Section 291 gives ethical rules regarding general and technical standards like financial statements’ submission by a member in public practice (Sec. 291-10) etc.

• Section 300 – Responsibilities to Clients

This section illustrates various responsibilities of a member towards his clients. For example, a member shall not share his client’s confidential information with any other client (Section 301), a member shall not receive any contingent fee from his client in return of his services (Section 302). And Section 391 lists ethical responsibilities of a member towards his clients for example the member shall not use a third party service provider to provide services to his own client (Subsection 391-1) etc.

• Section 400 – Responsibilities to Colleagues

This section illustrates various responsibilities of a member towards his colleagues. The content of this section is reserved by AICPA.

• Section 500 – Other Responsibilities and Practices

This section describes other responsibilities and practices required to be performed by a member. This section covers subsections 501-503, 505 and 591. Section 501 gives a list of discreditable acts that shall not be performed by a member of AICPA. Section 502 prohibits a member to obtain clients through advertising or other misleading, deceptive or false solicitation activities. Section 503 prohibits a member to accept commission and referral fees. A member is allowed to accept permitted commissions only and that too need to be properly disclosed. Section 505 prohibits a member from practicing public accounting under a misleading firm name. The member can practice under the organizations permitted by the law and he can designate himself as a member of AICPA if and only if all the co-owners of his firm are also the members of AICPA. Section 591 gives other ethical rulings regarding a member’s responsibilities and practices.

Running head: ACCT525 1

ACCT525 5

AICPA Code of Professional Conduct

Student’s Name

Institutional Affiliation

Introduction

The accounting professional code of conduct was introduced to provide professional guidance to its members in all industries. The code consists of the guiding principles and the professional rules. The AICPA’s Code of Conduct Principles provides a framework to enable the execution of the rules in order to govern and guide the performance of members. (can you 2 more sentences)

Section 50-Principles of Professional Conduct

It comprises Section 50-57. According to Section 50, AICPA membership is voluntary to any qualified individuals. The members are required to maintain self-discipline and recognize their professional roles and responsibilities towards different stakeholders such as clients, public, and other professionals. Section 52 requires the members to exercise professional and moral judgment in their professional duties (“AICPA,” 2013). According to Section 53, AICPA’s professional members are required to perform their duties in public interest. Also, members are required to honor their trust on public members. In addition, sections 54 states that all members should promote public confidence and perform their duties with integrity. According to section 55, members should be independent and operate freely without any conflict of interests (“AICPA,” 2013). In addition, Section 56 provides professional guidance and requires members to exercise due care when performing their duties to the public. According to “AICPA,” (2013), “Section 57 provides guidance to help members to identify the scope and nature of their services according to the principles of the AIPCA Code of Professional Conduct.” (you didn’t include section 51 can you include section 51 )

Section 90-Rules: Applicability and Definitions

It includes Section 91 and 92. According to the professional code of conduct, Section 91 provides guidance on the applicability while Section 92 offers a definition of different terms used in the professional code of conduct. Section 90 requires adherence to the code but it also gives for exemptions;

i. In case a foreign component auditor departs from an engagement team but his or her conduct is in accordance with IESBA, then he or she will is not subject to the discipline (“AICPA,” 2013).

ii. Also, if a member performs his duties outside the United States and his conducts are in line with requirements of the host country’s accounting profession, such a member will be subject to the discipline.

iii. Another exemption is offered when an organization operates outside the United States but leaves from the profession but its performance is in line with the IESBA requirements (“AICPA,” 2013).

iv. Finally, a member may be exempted from the code of conduct if when the rules indicate so. Can You describe more in details.

Section 100-Independence, Integrity, and Objectivity

This Section provides conceptual framework guidance on the independence, professional integrity, objectivity requirements. The section is made up of three sections (Section 101, 102, and 191). Section 101 provides independence standards together with different interpretations. On the other hand, Section 102 provides guidance regarding the interpretations of objectivity and integrity of the members (“AICPA,” 2013). Finally, Section 191 provides guidance on ethical requirements relating to member’s independence, objectivity, and integrity of members.

Section 200-General Standards Accounting Principles

This Section is made up of subparts 201-203 and 291. According to Section 201, members are required to be professionally competent, plan adequately, and make decisions based on the available data. Also, a member is supposed to perform professional duties with due care. Section 202 offers guidance on the compliance requirements for members. On the other hand, Section 203 provides guidance restricting members from expressing an affirmative opinion of financial reports of his clients (“AICPA,” 2013). Also, Section 203 restricts a member from stating that he is unaware of the modifications required in the financial reports to ensure they conform to the GAAP. Finally, Section 291 offers guidance on ethical standards for accounting professionals. (Can you describe more in details)

Section 300-Responsibilities to Clients

This Section offers guidance on professional’s responsibilities to their clients. For example, information to successor accountant information regarding tax irregularities in his client returns. Other responsibilities include guarding client’s information against competitors and safeguarding client’s sensitive information (“AICPA,” 2013). Section 391 provides a list of professional ethical responsibilities expected from members. Professional members are not required to use third party service providers to offer professional services to his or her clients. (you didn’t mention section 301 and 302, can you include that please)

Section-Responsibilities to Colleagues

ET Section 400 provides professional’s responsibilities to their colleagues. The details and the content this Section 400 is reserved for AICPA.

Section 500- Other Responsibilities and Practices

The Section is made up of subsections 501-503. Also, it contains 505 and 591. Generally, Section 500 states the practices and responsibilities of members. Section 501 provides a guideline on acts that shall not be performed by members of AICPA. On the other hand, Section 502 prohibits misleading or advertising to obtain clients. Also, this Section prohibits false or deceptive solicitation duties. In addition, Section 503 prohibits members from receiving referral fees and commissions (“AICPA,” 2013). However, members are allowed to receive permitted commissions only. Members are required to properly disclose the commissions received according to the professional code of conduct. Section 505 prohibits members from offering professional services under a misleading name of the firm. Finally, section 591 provides guidance on ethical responsibilities and practices expected from professional members. (you didn’t mention section 502, can you include that please)

References

AICPA. (2013). Code of Professional Conduct and Bylaws. Retrieved February 3, 2018, from AICPA : http://www.aicpa.org/RESEARCH/STANDARDS/CODEOFCONDUCT/ Pages/default.aspx.