Abstract
Accountant professionals are entrusted to manage people’s and organizations’ financial information in a number of ways. While some deal with million-dollar transactions, others assist in safeguarding retirement funds of clients. Irrespective of one’s role, upholding ethical standards while taking responsibilities is very important. Ethical guidelines are vital principles that professionals choose to abide by and maintain professionalism to the public. Following the stipulated, ethical rules help earn trust and develop honest as well as fairness. An individual who joins organizations and gets the credibility to be public CPAs strive to build an image of their profession. On the contrary, not everyone in the field of accounting can be trustworthy. With that, there are cases of ethical violations and damage to public trust. To resolve ethical dilemmas does not end up well. Typically, there are critical professional standards worth of attention to any person aspiring to work in the accounting sector.
Usually, it is easy to think that business ethics and business laws apply interchangeably. In the real sense, that is not the case, as businesses take actions that are legal but may fail to act ethically. As such, understanding the two concepts- law and ethics in business, is helpful. Business ethics are professional codes of conduct applicable to moral concerns in commercial settings. Organizations survive in natural and social environments, requiring to compel towards responsibility on conditions endured. Regardless of stress or demand, business survival is certain to be ethical. Failures to remain professionally ethical subject businesses to legal actions. The purpose of this paper is to select and analyze a professional organization concerning its code of ethics.
Accounting- American Institute of Certified Public Accountants (AICPA)
I select this professional organization because of its wide range of benefits to members. As an aspiring member of AICPA, I will enjoy privileges such as scholarship opportunities, vast tools to help navigate my career, easy access to the organization resources like websites, and practical guidance. The organization hep its members in making career decisions, and being part of a supportive group is my dream. As such, I chose to be a member of AICPA, and addressing its code of conduct is comfortable in this assignment. Additionally, this accounting organization provides special discounts to its members on AICPA products as well as publications. Examples of discounts to enjoy as a member include affordable life insurance, up to 30% off accounting CPE and members-only savings on their favorite brands. Thus, it is due to such membership benefits that I found this organization viable for the ethics project assignment.
American Institute of Certified Public Accountants (AICPA) is a non-profit professional organization in the US for certified public accountants. The organization was founded in the year 1887 under the association of public accountants. AICPA has an integral rulemaking and setting standards that CPA professionals must adhere to. Also, it serves as an advocate for legislative bodies and interest groups. AICPA avails more than 400,000 members in about 140 states with information, resources, and leadership to ensure CPA services are delivered in professional ways. From the early 1970s, AICPA was an organizational body setting professional standards for CPAs in various areas, until later when other organizations like the financial accounting standard board (FASB) came up. However, AICPA still retains its standard-setting roles in areas like professional ethics financial statement auditing, CPA firm quality control, attest services, and valuation of businesses.
In my field of study, which is accounting, AICPA is relevant to provide guidelines on how to carry out financial statement auditing ethically. Usually, firms produce financial statements that give details about the financial position and how they are performing. Such kind of information is useful to a wide range of stakeholders like investors to make economic decisions. Individuals who own businesses are not the one who manages it in most cases. As such, it means company owners and stakeholders like suppliers, customers, or banks take comfort from an independent assurance that financial records presented are fair. Enhancing the degree of confidence in financial statements requires a qualified external party to be engaged in examining financial details and give professional opinions. Therefore, my role in such situations as a financial auditor has to be according to AICPA professional guidelines.
AICPA Code of Professional Ethics- Summary
AICPA code of professional standards can be divided into two sections: first, the principle and rules. The principle part contains a framework for rules which are purposed to guide the performance of members. The body’s council is authorized to designate agencies for promulgating technical guidelines under the rules. Bylaws demand adherence to the formulated rules and standards. The code of ethics was established by the membership to govern professional members like those in public settings, industries, government entities, and education. The compliance with the professional code of standards as with other guidelines in the open society depends on the ability of members to understand and take actions on public opinion and in the disciplinary process whenever necessary. The membership in AICPA is voluntary, and upon accepting it, CPAs assumes obligations of self-discipline above and beyond what the regulations require.
In the first section on principles, the first article of the code of ethics addresses responsibilities. The guideline state that, when carrying duties and CPA professionals, members have to exercise moral reasoning and judgment in all activities. CPAs perform crucial roles in society, and thus, they are held responsible by the AICPA standards to be all those who consume their services. Additionally, responsibility is extended to cooperating with other professionals to improve the art of accounting and enhance public confidence.
The second article regards public interest. The guideline stipulates that AICPA members ought to accept obligations to behave in ways that serve the interests of the public, trust, and show commitment to their work. Typically, one distinguishing marl of any profession is his or her ability to accept responsibility to people. The accounting profession’s public involves people like clients, government, investors, credit givers, employers, and financial communities. All of these people rely on the objectivity of CPAs, and this imposes heavy responsibility to the professionals. When discharging professional responsibilities, CPA professionals can encounter conflicting interests from various groups. When resolving the matters, AICPA members have to act with integrity guided by a precept that the benefits of clients and employers are best served when responsibilities are fulfilled to the public.
The third part of the code principle is integrity, which stipulates that all professional roles must be performed with the utmost integrity to maintain public confidence. In this principle, the AICPA standard requires members to be honest and real, among other things, in the constraint of maintaining confidentiality. Public trust must not be substituted with personal gains or advantages. Members should consider asking themselves questions like, am I doing the right thing? Is my integrity retained?
The other principle stipulated in the code of ethics is that of objectivity and independence. In this guideline, a member of the AICPA organization must maintain objectives and be free from conflict of interests when resuming roles or responsibilities. Other principles covered include the due care and scope or nature of services. Under due care, the profession’s technical and ethical guidelines should be observed while striving to improve competence and improve services rendered continually. In other words, a quest to excel is the essence of due care. Competence is needed to be maintained through a level of understanding and knowledge that allows professionals to provide services with acumen. In the scope of services, CPAs ought to observe the principles of the AICPA Code of conducts to know well the nature of services to provide. Examples of governing rules include a rule on independence, integrity, and objectivity, the law of complying with standards, rule of accounting principles, and the rule of maintaining client confidentiality.
Section two of the AICPA professional standards entail the rules and applicability. Bylaws of this professional organization require members to adhere to the provisions of code of conduct and should be prepared to justify departure from the regulations. Rules apply to members who are working within the US, and those outside the state would not be subjected to discipline for departing from the regulations. In applying the AICPA code of ethics, rules require that a member might be held responsible for complying by all individuals associated with him or her when practicing accounting. Additionally, no member should allow others to conduct roles on his or her behalf without compensation, and also, this could imply a violation of rules.
The reason why these points are essential to the organization is to ensure members act professionally and maintain a high level of confidence in the public. Members of the public trust professionals with their personal information, and therefore it is most paramount that the entrusted data remains protected. Otherwise, revealing clients’ details can lead to security issues and subject members to severe consequences. To avoid this, the principles and rules of the AICPA professional code of standard serve as a road map to the members in helping maintain trust. The points are meaningful to my profession because I will be surrounded by various people requiring support, hoping that their information is safe with me. To maintain my career in the accounting field, I have a duty to do what it takes to ensure satisfactory services. Otherwise, if I fail to respect people’s wishes and honor my job by acting ethically, this will not only result in severe punishment but could cost me a career.
Most Important Points within the AICPACode
AICPA code of conduct is based on key principles as discussed in summary, and among them, the essential points, in my opinion, are integrity, objectivity, and disclosure or independence. In integrity, honesty is an excellent policy whereby services are provided with the goals of gaining trust. Objectivity means remaining impartial without being loosely involved with clients. Objectivity enhances independence, making professional members maintain independency without conflict of interest. Under the professional code of standards, performance has to be objective. Otherwise, conflict of interest can arise when a professional perform roles or services for a client with a relationship in another person or entity. Through that way, personal judgment can be hampered, leading to impairment of objectives. An example of a scenario is when an accountant suggests that a client should invest in an organization where the professional, who is a member of AICPA, has a financial interest. When faced with the conflict of interest scenarios, one must disclose to the clients who are or will be affected and obtain consent. Thus, I saw those point necessary because, in most cases, conflict of interest occur, forcing members to act unprofessional or violate ethical guidelines Conflict of interest event are common. It is by remaining objective and adhere to performance with integrity that one will be free. Mostly, not all the time, people will act with integrity, but the principle of objectivity and disclosure should guide one into honesty servicing. Alternatively, it is honest and remaining objective to earn public trust that CPA professionals will act with integrity.
Examples of Standards Violation
Peter Magee, a certified public accountant and a member of the AICPA organization, was found to have violated the codes of professional standards by failing to be compliant. The Ethic charging authority (ECA), which involves the AICPA ethics executive committee, found Mr. Magee’s auditor report to be misleading. As an auditor, he has failed to document Workpapers firm’s evaluation and included only specific funds as part of the department. The auditor is certified to operate in the state of Indiana. Sue of generic term government fund was found to be unclear to the users who needed financial statements. Additionally, when the financial report of the department failed to shoe net assets and governmental activities, the auditor did not modify his opinion. After ECA investigated Peter Magee’s, the auditor signed to take continuing education (CPE) program to understand the auditing standards better and have a suspension of two years by the AICPA.
The second case example is for Chalavoutis, Christopher J. of Carle Place firm in New York, which was entered into a settlement agreement under the AICPA ethics enforcement program. Mr. was charged with failure to ensure that his firm had an appropriate peer review. In such a case, the professional violated rules of codes of ethics on professional competence, standard compliance, and accounting principles. The firm failed to provide financial statements that relate party transactions or disclosed subsequent events. The consequence of such violations is a crime that is punishable by imprisonment. To consider ECA from carrying out further investigations on Chalavoutis’ conduct, the professional agreed to comply immediately with standards and submit evidence.