AICPA Code of Professional Conduct

Instructor: Dr. Douglas Hawks

Douglas has two master's degrees (MPA & MBA) and is currently working on his PhD in Higher Education Administration.

The American Institute of Certified Public Accountants (AICPA) takes ethics and professional conduct very seriously. In this lesson, we'll discuss their Code of Professional Conduct and why it is 150+ pages long.

The American Institute of Certified Public Accountants

The American Institute of Certified Public Accountants, also known as the AICPA, is the world's largest professional association for Certified Public Accountants (CPA). While American is in its name, the AICPA has nearly a half-million members from over 140 countries, and it has been around for more than 130 years.

As the largest association in the world for such an important profession, it is important that the leadership of AICPA communicate clearly with their members about the standards required to represent the profession. With such a diverse membership, it is also important that those standards are general enough that they can be expected, and followed, by members of many different cultures.

The AICPA Code of Professional Conduct

Providing direction and guidance is the stated objective of the AICPA Code of Professional Conduct. The Code of Professional Conduct is over 150 pages long and is divided into four main sections. Each section of the code is written for certain types of members.

The first section, or the preface, focuses on the introduction, definitions, and guidance that is applicable to all members of the AICPA. This section touches on how the Code is organized, how it may be modified, and the definition of concepts that are applicable to all members, such as integrity, objectivity, and due care.

This first section also discusses when the Code is applicable. For example, a member in public practice may also be a member in business, such as a partner of a public accounting firm who also serves on the board of directors of a non-client business. In those cases, the Code for members in public practice is applicable when the CPA is acting in that role, and the Code for members in business is applicable when they are acting in that specific role. The length of the preface is about 15% of the Code.

The second section of the code applies to members in public practice. These are the public accountants who work for one of the 'Big Four' accounting firms, or for any regional and local accounting firm that provides accounting and auditing services to business clients. The guidance for these members makes up the majority of the code - over 110 pages, or 73%.

The importance of the guidance for public accountants is largely due to their relationship with clients. Clients pay public accountants to audit their financial statements and provide an opinion on their accounting and business practices. Since investors put a lot of confidence in the statements made by public accountants, the AICPA wants to make sure that public accountants are acting appropriately and avoiding conflicts of interest or undue influence by the management of clients. Accountants must clearly understand their role as an advisor and confidant of sensitive information.

The third section, which is just 11% of the Code, is applicable to members in business. These members are those licensed CPAs who work in an accounting capacity for a specific business. All of the work they do is for their employer, so they are not attesting or offering an opinion on another firm's financials. This means that much of the guidance related to conflicts of interest, confidential information, and the ethics of charging fees for accounting opinions is not applicable. Since members in business CPAs do not have some of the same potential issues as members in public practice, there is no need to include those topics in the third section.

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