1. The assurance of accurate and ethicalaccountancy is essential in running a capital market system. The public (investors, lenders, insurers,customers, etc.) must be able to rely on a company’s financial statementsin order make sound decisions for investment, lending and general commerce. Accountants/auditors must be able to produce objective,reliable and accurate financial statements for the use of the public. Without the reliability of accurate financialstatements and the trust of the public, our capital markets could not exist inany successful way.2.
The American Institute of CertifiedPublic Accountants (AICPA) developed the “AICPA Code of Professional Conduct”and it consists of six main Principles that provide the framework for the Rules of Professional Conduct. These rules are the enforceable requirements underthe AICPA Code. The code also includes Interpretationsof those Rules, which provide guidelines for the applicability of therules. In addition, the Code also containsa series of threats and safeguards that pertain to each rule that help guidethe professional through expected situations. 3. The Principles are general values and fundamentalbeliefs to guide accountants in the way they conduct their business. Generally, they are considered the frameworkfor the Code and they illustrate the profession’s responsibilities to thepublic. Rules of Professional Conduct area more structured and detailed guide to the implementation of the coreprincipals.
4. Independence, objectivity and integrityare all crucial aspects of the Code of Professional Conduct. Independence requires the professional to beindependent in the performance of services, meaning there must not be any otherprofessional or familiar relationship with the client that may influence theoutcome of the accountancy work. Theprofessional must be independent in mind and in appearance. The rule of Objectivity and Integrity refer tothe members ability to maintain their professional judgment and not let othersinfluence or change their results. Thisrule also states that the professional may not knowingly misrepresent informationpertaining their client or their to the work. 5. If investors did not perceive financialstatement auditors has having independence, objectivity and integrity andtherefore didn’t trust the information provided on financial statements, ourcapital market system would deteriorate.
Accurate and dependable information is the basis of all commerce in our society. The decisions investors, loan officers,customers, oversite committees, competitors, etc. are all dependent on theinformation provided in financial statements. To be able to accurately compare financial statements with in industriesis also important in a capital market system.6. The Financial Accounting Standards Board(FASB) creates the Generally Accepted Accounting Principles (GAAP) used throughoutthe accounting industry to create accurate and standardized financial statements. All publicly traded companies within the USare required to use GAAP rules and standards. Accountants apply GAAP through FASB pronouncements referred to asFinancial Accounting Standards (FAS).
Manyother boards like The Financial Accounting Standards Advisory Councils (FASAC),the Accounting Standards Committee (AICPA), the Accounting Principles Board (APB)and the Committee on Accounting Procedure (CAP) have either helped to createand/or influence FAS pronouncements. 7. The main difference between parts 1 and2 of the AICPA Code of Professional Conduct is that the part 2 of the Code appliesto members of business (industry or government) and therefore the independence rulesdo not apply. One cannot be independent inthis scenario because they are employees of a business. 8. If a CPA were required by a subpoena orcourt order to produce confidential client documents, the CPA would not be in violationof the Confidential Client Information Rule if reporting an illegal act that ismaterial to the financial statements and the board of directors have not taken appropriateaction to correct the violation.9.
If a CPA were to anticipate that theirwork might be subjected to a subpoena, they might ask that a lawyer be presentfor the work. Unlike accountants, thathave confidential communication withtheir clients, lawyers have privilegedcommunications with their clients. Theseprivileged communications are protectedfrom subpoenas or court orders by law.
10. Yes, a CPA may charge a contingent fee baseon consulting services to help reduce a client’s energy usage as long as noneof the services in part 1 of the Contingent Fees Rules is performed.11. No, I don’t believe that a CPA couldprovide expert witness testimony on behalf of a plaintiff without violating theContingent Fees Rule. In order to dothis, the CPA would have a vested interest in the outcome of the ruling and thereforewould not be objective in the testimony.12. Mr.
Gable failed to enroll his firm in apeer review program in the state of Missouri. Mr. Gable’s AICPA membership was suspended for two years, his license isplace on probation for five years, directed to pay a $1,500 penalty, andcomplete the AICPA’s ethics course entitled “Professional Ethics: The AICPA’s ComprehensiveCourse” with a score of 90% or better.