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The American Institute of Certified Public Accountants is a professional organization that provides a membership to individuals who are Certified Public Accountants. This organization also offers a code of professional conduct for accountants to follow in the business environment.
Composition, Applicability, and Compliance :
The code of professional conduct of the AICPA (American Institute of Certified Public Accountants)
PrinciplesConsists of two sections :
The first section can provide the framework for the second one rules the performance of the professional services by members. The Council of the American Institute of Certified Public Accountants is authorized to set the bodies to publish technical standards under the Rules, and the internal systems require commitment to those rules and standards.
The Code of Professional Conduct was adopted by the membership to provide directions and rules to all members ( Those in public practice, industry, in government, and in education ) in the performance of their professional responsibilities.
Compliance with the Code of Professional Conduct, as with all standards in an open society, depends primarily on member's understanding and voluntary actions, secondarily on reinfrocement by peers and public opinions , and definatley on disciplinary proceeding, hen necessary, against members who fail to comply with the rules.
Other Guidance :
Interpretation of Rules of Conduct consist of interpretations which have been adopted, after exposure to state societies, state boards, practice units and other interested parties, by the professional ethics division's executive commitment to provide guidelines as to the scope a nd application of the rules but are not intended to limit the scope and the application. A member who leaves from such guidelines shall have the burden of justifying such departure in any disciplinary hearing. Interpretation which existed before the adoption of the Code of professional Conduct on January 12, 1988, will remain in effect until further action is considered necessary by the appropriate technical committee.
Ethics Rulings consist of formal rulings made by the professional ethics division's executive committee after exposure to state societies, state boards, practice units and other interested parties. Members who depart from these rulings will have to justify these departures. Ethics Rulings -provided before the adoption of the Code of the Professional Conduct on January 12, 1988- will remain in effect until further action is noticed necessary by the technical committee.
Publication of an Interpretation OR Ethics Ruling in the Journal of Accountancy constitutes notice to members. Hence, the effective date of the pronouncement is the last day of the month in which the pronouncement is published in the Journal of Accountancy. The professional ethics division will take into consideration the time that would have been reasonable for the member to comply with the pronouncement.
A member should also consult, if he can, the ethical standards of his state CPA society, state board of accountancy, the securities and exchange commision ( SEC ), and any other governmental agency which may adjust his client's business or use his report to evaluate the client's compliance with applicable laws and related regulations.
Difference between Code of Ethics & Code of Conduct :
Code of Ethics :
An ethical code in its formal sense is an attempt by an organization to codify the values of the group -- a statement of overarching principle telling members what is right and what is wrong as a guide to all decision making within the organization. Codes of ethics set out general principles, often social or moral, that guide rather than dictate behavior.
Code of Conduct :
Codes of conduct are specific rules designed to outline specific practices and behaviors that are to be encouraged or prohibited under the ethical code of an organization or individual. Codes of conduct lay out guidelines and procedure to be used to determine whether violations of the code of ethics have occurred and delineate the consequences for such violations. Conduct codes govern things like conflicts of interest or acceptance of gifts and what penalties should be imposed for specific infractions.
Codes of Practice :
Codes of conduct and codes of ethics are often confused with codes of practice. A code of practice is a document designed to provide a clear example of what is correct, ethical or right behavior in any circumstances. A code of practice generally implies that violation of these codes of practice can result in disbarment or expulsion from the organization.
Codes of ethics and codes of conduct are designed to promote ethical behavior among members of a group or in an individual. Both help to identify what is acceptable behavior and what is not and to promote higher standards of behavior within the group. Both help establish a framework for evaluating the behavior of the individual or group member and both help identify those who subscribe to these codes as members of a specific group.
Ethical codes are focus on broader issues and are often framed as a belief statement regarding the organization's mission, its values and expectations for its members. A conduct code is designed to translate the ethics code into specific do and don't guidelines and to promote adherence to the code of ethics by providing specific examples of real world applications of the code of ethics. The code of ethics is very broad and theoretically can be used to guide decision-making in all areas of member behavior. A code of conduct only covers what specific incidents and situations the composers think to put into the code. Should behavior occur which is not covered under the conduct code, members would have to refer to the code of ethics in order to revise the code of conduct to cover the omitted behavior or situation.
Why do we NEED the code of Ethics ???
Usually part of an overall ethics policy, a code of ethics reinforces the moral principles and commitments of an organization by spelling out acceptable and responsible behavior in a way that is clear to all within the organization. It also tells others what the organization stands for and what to expect when doing business with it.
In an article entitled "Codes of Ethics with Impact," which appeared in The CPA Journal Online, state that "a code of ethics can guide individuals who face novel ethical situations and serve as a general statement of company expectations for individuals who face situations with ethical dimensions."
Two components for the Code of Ethics :
A code of ethics usually has two parts. The first outlines what the company or organization aspires to; the second explains the values of a company and translates them into standards and procedures to be followed by the staff.
Some Principles of Professional Conductâ€¦!
Membership in the American Institute of Certified Public Accountants is voluntary. By accepting membership, a Certified Public Accountant assumes an obligation of self-discipline above and beyond the number of the laws, prcedures, and regulations that are required.
These priciples of the Code of professional Conduct of the American Institute of Certified Public Accountants express the profession's recognition of its responsibilities to the public, to clients, and to colleagues. They guide members in the performance of their professional responsibilities and express the basic principles of ethical and professional conduct. The principles call for a fixed commitment to honorable behaviour, even at the sacrifice of personal advantage .
As professional, an essential role in the society is performed by the Certified Public Accountants. Consistent with that role, members of the American Institute of Certified Public Accountants have responsibilities to all those who use their personal services. Members also have a continuing responsibilty to help and work with each other to improve the art of Accounting, maintaining the public's confidence, and execute the profession's special responsibilities for self-governanace. The collective efforts and works of all members and colleagues are required to maintain and enhance the traditions of the profession.
The Public Interest :
Members should accept the obligation to act in a way that will serve the public interest, honor the public trust, and demonstrate commitment to professionalism.
A distinguishing mark of a profession itself is acceptance of its responsibilities to the public. The accounting profession's public consists of clients, credit donors, governments. Employers, investors, the business and the financial community, and others who depend on the objectivity and integrity of Certified Public Accountants to maintain the orderly functioning of commerce. This reliance imposes a public interest responsibilty on Certified Public Accountants.The public interest is defined as the collective well-being of the community of people and institutions the profession serves.
In discharging their professional responsibilites, members may encounter conflicting pressures from among each of those groups. When resolving these conflicts, members should follow integrity, guided by the principle that when members fulfill their responsibility to the public, client's and employer's interests are best served.
Those who depend on Certified Public Accountants expect them to discharge their responsibilities with integrity, objectivity, because of professional care, and a true interest in serving the public. They are expected to provide quality services, enter into fee arrangements, and offer a range of services -all in a manner that demonstrates a level of professionalism consis- tent with these principles of the Code of Professional Conduct.
All who accept membership in the American Institute of Certified Public Accountants commit themselves to honor the public trust. In return for the faith that the public reposes in them, members should seek continually to demonstrate their sincerity to the frofessional excellence.
To maintain and broaden public conï¬dence, members should perform
all professional responsibilities with the highest sense of integrity
Integrity is an element of character to professional recognition. It is the quality from which the public trust derives and the benchmark against which a member must test all decisions. Integrity requires a member to be, among other things, honest and candid within the constraints of client conï¬dentiality. Service and the public trust should not be subordinated to personal gain and advantage. Integrity can accommodate the unintended error and the honest difference of opinion; it cannot accommodate deceit or subordination of principle.
Integrity is measured in terms of what is right. In the absence of speciï¬c rules, standards, or guidance, or in the face of conï¬‚icting opinions, a member should test decisions and deeds by asking: "Am I doing what a person of integrity would do? Have I retained my integrity?" Integrity requires a member to observe both the form and the spirit of technical and ethical standards, circumvention of those standards constitutes subordination of judgment.
Integrity also requires a member to observe the principles of objectivity and independence and of due care
Objectivity and Independence :
A member should maintain objectivity and be free of conï¬‚icts of
interest in discharging professional responsibilities. A member
in public practice should be independent in fact and appearance
when providing auditing and other attestation services.
Objectivity is a state of mind, a quality that lends value to a member's services. It is a distinguishing feature of the profession. The principle of objectivity imposes the obligation to be impartial, intellectually honest, and free of conï¬‚icts of interest. Independence precludes relationships that may appear to impair a member's objectivity in rendering attestation services.
Members often serve multiple interests in many different capacities and must demonstrate their objectivity in varying circumstances. Members in public practice render attest, tax, and management advisory services. Other members prepare ï¬nancial statements in the employment of others, perform internal auditing services, and serve in ï¬nancial and management capacities in industry, education, and government. They also educate and train those who aspire to admission into the profession. Regardless of service or capacity, members should protect the integrity of their work, maintain objectivity, and avoid any subordination of their judgment.
For a member in public practice, the maintenance of objectivity and independence requires a continuing assessment of client relationships and public responsibility. Such a member who provides auditing and other attestation services should be independent in fact and appearance. In providing all other services, a member should maintain objectivity and avoid conï¬‚icts of interest.
Although members not in public practice cannot maintain the appearance of independence, they nevertheless have the responsibility to maintain objectivity in rendering professional services. Members employed by others to prepare ï¬nancial statements or to perform auditing, tax, or consulting services are charged with the same responsibility for objectivity as members in public practice and must be scrupulous in their application of generally accepted accounting principles and candid in all their dealings with members in public practice.
Due Care :
A member should observe the profession's technical and ethical standards,
strive continually to improve competence and the quality of services, and
discharge professional responsibility to the best of the member's ability.
The quest for excellence is the essence of due care. Due care requires a member to discharge professional responsibilities with competence and diligence. It imposes the obligation to perform professional services to the best of a member's ability with concern for the best interest of those for whom the services are performed and consistent with the profession's responsibility to the public.
Competence is derived from a synthesis of education and experience. It begins with a mastery of the common body of knowledge required for designation as a certiï¬ed public accountant. The maintenance of competence requires a commitment to learning and professional improvement that must continue throughout a member's professional life. It is a member's individual responsibility. In all engagements and in all responsibilities, each member should undertake to achieve a level of competence that will assure that the quality of the member's services meets the high level of professionalism required by these Principles.
Competence represents the attainment and maintenance of a level of understanding and knowledge that enables a member to render services with facility and acumen. It also establishes the limitations of a member's capabilities by dictating that consultation or referral may be required when a professional engagement exceeds the personal competence of a member or a member's ï¬rm. Each member is responsible for assessing his or her own competence-of evaluating whether education, experience, and judgment are adequate for the responsibility to be assumed.
Members should be diligent in discharging responsibilities to clients, employers, and the public. Diligence imposes the responsibility to render services promptly and carefully, to be thorough, and to observe applicable technical and ethical standards.
Due care requires a member to plan and supervise adequately any professional activity for which he or she is responsible.
AICPA Professional Standards , Volume 2 , AICPA , CCH incorporated , Chicago , As of June 1, 1996.
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