AICPARulesofProConduct-Web

8/1/20191AICPACodeofProfessionalConductDr.DonaldK.McConnellJr.8/1/20192AICPA’SCodeofProfessionalConductAttemptstobalancegeneralstatementsofidealconduct(emphasisonpositiveactivities)withspecificrules(enforceabilityofminimumbehavior)Containsfourparts:EthicalprinciplesRulesofconductInterpretationsEthicalrulings8/1/20193EthicalPrinciples(ET51-57,volII)Idealstandardsofethicalconductstatedinphilosophicalterms:ResponsibilitiesThepublicinterestIntegrityObjectivityandindependenceDuecareScopeandnatureofservicesThoughnotenforceable,burdenofproofonCPAfornoncompliance8/1/20194RulesofConduct(ET100-500,volIIMinimumstandardsofethicalconductstatedasspecificrulesTheseareenforceableOtherorganizations’rulesofconductcanbelessormorerestrictivethanAICPA’s:SECTSBPA8/1/20195InterpretationsofRulesofConductForfrequent,recurrentquestionsaboutaspecificruleofconductThoughnotenforceable,aCPAmustjustifydeparturePreparedbyAICPADivisionofProfessionalEthics8/1/20196EthicalRulingsExplanationstospecificimportantquestionsaboutrulesofconductBasedonquestionssubmittedtoAICPAbypractitionersNotenforceable,butaCPAmustjustifydeparture8/1/20197WhatShouldYouDoWhenAICPARulesofConductDifferfromSEC,TSBPA?FollowwhicheverismorerestrictiveNotsureaboutanethicsissue?CallTSBPA8/1/20198AICPARulesofConductHadBeenConsiderablyChangedinthePastDecadeorSo:SolicitationrestrictionseliminatedRestrictionsonoffersofemploymenteliminatedCompetitivebiddingrestrictionsessentiallyeliminatedAdvertisingrestrictionseliminatedTradenamesnolongerdisallowed,unlessmisleadingVouchingforachievabilityofforecastsnolongerprohibitedContingentfeesandcommissionsnolongerprohibitedfornonattestclients8/1/20199AICPAAlsoRecentlyAdopteda“CoveredPerson”IndependencePerspectivePreviousAICPArulestooka“firmwide”IndependenceperspectiveIntendedtomodernizerulesforauditorindependenceregarding:InvestmentsinauditclientsEmploymentrelationshipsScopeofservicesprovidedtoSECclientsOldruleswereoutofdateandunnecessarilyrestrictive,givenincreasingnumbersofdualincomefamilies8/1/201910WhatAreCoveredPersons?Coveredpersonsinclude:TheauditengagementteammembersPersonswithinthechainofcommandinrelationtotheauditteam[includingconcurringpartner,Officepartnerincharge[PIC],regionalpartner]Partnersandmanagersprovidingatleast10hoursofnon-auditservicestotheauditclient[SECposition]OtherpartnersintheofficeoftheengagementpartnerThefirmanditsemployeebenefitplansAnentitycontrolledbyacoveredmember8/1/201911ImmediateFamilyMembersImmediatefamily:spouse,spousalequivalent,ordependentTheserelationshipsareconsideredascribedtothecoveredperson8/1/201912Rule101:IndependenceIndependencewouldbeimpairedifacoveredpartyhadadirectfinancialinterestinaclient,oramaterialindirectfinancialinterestinaclientAdirectinterestisownershipofequitysharesIndirectinterestsexemplified:ApastdueauditfeeArelativeordependentowningclientequitysharesA“low-balled”auditfeeMemberownershipofsharesofmutualfundwhichownsclientshares8/1/201913Nevertheless,SomeCPAFirmsAreContinuingtoFollowTheMoreConservative“Firm-Wide”Approach:YouCannotOwnStockinAnyClientCompany!8/1/201914Interpretation101-1:IndependenceImpairedIfCoveredParty:ServedasofficerordirectorofanauditclientWastrusteeorexecutorhavingdirectormaterialindirectfinancialinterestinanenterprise[client]Hadjointbusinessinvestmentwithclientorofficerthereofmaterialinrelationtothemember’snetworthHadanyloantoorfromclientorofficerthereof,exceptasperinterpretation101-58/1/201915HonoraryDirectororTrusteePositionswithAuditClients:Independencenotimpairedif:Organizationisanot-for-profit[charitable,religious]auditclientPositionispurelyhonoraryCPAdoesnotvoteorparticipateinmanagementfunctions8/1/201916Interpretation101-2:FormerPartnersorShareholdersWorkingforAuditClientsFirmindependenceisnotaffectedif:RetirementbenefitsarefixedastoamountsanddatesBenefitscanbeadjustableforinflationBenefitscannotbe“participatory”FormerpartnerdoesnotparticipateinfirmbusinessafterreasonabletransitionFormerpartnerdoesnotappeartoparticipateinfirm’sbusiness8/1/201917However,Sarbanes-Oxley[SOX]Prohibits:HiringaCEO,controller,CFO,chiefaccountingofficerwhohadbeenemployedbytheissuer’sCPAfirmintheone-yearperiodpriortotheaudit8/1/201918Interpretation101-2:FormerPartnersorShareholdersWorkingforClients(con.)Formerpartner’snameshouldnotbeassociatedwiththeCPAfirmin:OfficebuildingdirectoriesMembershiplistsofcivicorprofessionalorganizationsProvidingofficespacetoaformerpartner,includingadmin.support:Acceptable,unlessSignificantinfluencewithaclient8/1/201919Interpretation101-5GreatlyRestrictsLoanswithClientFinancialInstitutions.WhatIsPermitted?Carloansandleasesincustomaryterms(nosweetheartdeals)Creditcardandadvancebalancesnottoexceed$5000LoansonCSVofwholelifeinsurancepoliciesLoanscollateralizedbycashdeposits(passbookloans)Mortgagesexistingasof1992,butno“upsidedown”loans8/1/201920AllOtherLoansAreNowProhibited,Including:HomemortgagesOthersecuredloansOtherimmaterialloansHowever,newfinancialinstitutionaud