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Accounting ethics is extremely important to accountants and their clients. Competence, reliability, and objectivity are factors that one considers when assigning an accountant. Accountants must be qualified and have professional integrity. People have high expectations of professionals and to keep up with this they have adopted professional codes of conduct to maintain discipline among members.
Accountants, who join professional organizations, agree to adhere to the ethical standards of the organization. For example, the American Institute of Certified Public Accountants has set rules and regulations for its members. The rules are outlined and give the action to be taken once the rule is violated. Accountants should bear in mind their responsibility to the public when carrying out their duties. Accounting professionals should have competence, confidentiality, integrity and objectivity when working. They should only undertake jobs which they can competently complete. They should also demonstrate due care in their work (Shroyer, 2008).
The AICPA has its own means of enforcing their rules on members. A CPA who violates the codes of ethics may be expelled from the organization. The intensity of the case will determine the action taken by AICPA which can be as much as imprisonment (Maughan 2011).
Rule 102 – Integrity and objectivity
A member of AICPA is expected to maintain objectivity and integrity. The member shall not deliberately misrepresent facts or subordinate his or her decisions to others. For instance, when someone intentionally allows or leads one to make inaccurate and false entries on records of finance. If a member, does not correct false and misleading entries on financial records he or she will have violated rule 102. Signing or allowing one to sign false and misleading documents is also a breach of rule 102.
In the case, of Paul T. Fink of Eagan MN, a member of AICPA knew and took part in changing the date on shipping documents. This gave misleading information on the expiry date of letters of credit. After investigation, AICPA charged Paul Fink with violation of the professional code of conduct under rule 102-integrity and objectivity. Paul Fink was also in violation of rule 102-4-subordination of judgment by a member. Under this rule, Fink did not investigate several apprehensive transactions that were clearly visible. Mr. Fink’s supervisor assured him that the transaction was legitimate, and he trusted him. Further Mr. Fink did not express his doubts about the transactions earlier to the audit committee and board and directors.
Paul Fink’s conduct was investigated, and under AICPA bylaws section 7.4 he agreed to give up his rights to a hearing, to neither admit nor deny the specified charges and to act in accordance with professional standards of AICPA. Mr. Fink was also expelled from AICPA and MSCPA, and his name, the charges and the settlement terms were published by ECA.
Rule 201-General standards
In this rule, a member of AICPA shall act in accordance with the set standards as shall be interpreted by bodies selected by the council. A member shall under professional competence carry out only those professional services that he or she can realistically complete with professional competence. Under rule 201, there are other standards such as due professional care, planning and supervision and sufficient, relevant data. For a member, of AICPA to perform professional services one should be competent enough to complete professional services.
Under Professional competence, a member should have technical qualifications and has the capacity to oversee and assess the quality of work. Other than having the appropriate information to finish work, the individual may want to study and check with with other experts in executing professional tasks. When a member of AICPA is unable to perform, professional services with competence he should propose someone competent as an associate or independently to perform the professional services required.
Steven Simons of Rosemont IL was suspended for six months for violating Rule 201-general standards. Steven Simons was not competent in his profession, therefore, Mr. Simons gave up his right to a hearing under section 7.4 of AICPA bylaws, and he also agreed not to accept or deny the charges against him and a six month suspension with the completion of CPE.
Rule 202—Compliance with standards
The auditing, reviewing, compilation, consultation services and other services by a member of AICPA should meet with the standards set by selected council bodies. Under this rule, Goldberg Elliot of Garden City New York was charged with professional misconduct. The ethics charging authority (EAC), AICPA and NYSSCPA, found Mr. Goldberg to be guilty of breaching professional competence. Mr. Goldberg was not able to account how he overcame the assumption that an auditor can ask for the proof of accounts receivable when auditing.
After investigating Mr. Goldberg agreed to give up his rights to a hearing under the bylaws of AICPA, neither accept or deny the charges against him, to act in accordance with professional standards of the professional services, that EAC shall publish Mr. Goldberg’s name, his firm’s name, and charges, and to be suspended from AICPA for 1 year. Further Mr. Goldberg was required to complete continuing professional education (CPE) within a given time and to give evidence attendance and completion. He was also required to hire a professional to review reports and financial statement for audit for one year.
Mr. Goldberg was also supposed to give the amount of hours expected to be used on the jobs. The work done by the appointed professional would be submitted to a committee on a quarterly basis. The reviews of the reports would be done at the expense of Mr. Goldberg. ECA would determine the nature of Goldberg’s work either satisfactory or unsatisfactory. After a specified period of time, the EAC will give Goldberg engagements for review. He will give a financial statement to the ECA who will review the work and decide the fate of Goldberg.
Rule 501—Acts discreditable
A member of AICPA shall not be dishonorable or discreditable to the profession. A client may ask for records that he or she gave the member, records that the member made for the client or supporting records that the member keeps. However, the member should return all records and reports that were given by the client to the client, give the client the records he or she (member) made for the client or retain the records and reports if they are not complete until they are ready and the supporting records should be given to the client unless there are outstanding fees.
When a member of AICPA has acted according to Rule 501 he is not under any duty to give any records to the client or former client unless in cases of loss due to acts of god or natural disaster. Goldberg Elliot of Garden City New York did not follow the prerequisite or conditions set by governmental bodies, commissions and other regulatory agencies. This act led to the breaching of rule 501-act discreditable. In the financial statement of the company, Mr. Goldberg was working for, some errors were detected. The balance sheet that had the company’s original form 10-K did not have a comparative balance sheet attached. Expense for warrants for the purchase of common stocks of the company was incorrectly recorded.
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In this case, Mr. Goldberg agreed to give up his right to a hearing under section 7.4 of the bylaws of AICPA. He also agreed not to accept or deny the charges, and to act in accordance with the professional standards of the professional services he offered. He accepted to be suspended by AICPA for 1 year and that his professional details such as his name, the name of his firm, charges against him and the disciplinary action to be published by ECA.
Agree or disagree with disciplinary action taken
The disciplinary action on violation of the codes of conduct may be tough but goes a long way in creating order in the professional organization. The AICPA trial board can acquit, reprimand, suspend the member up to two years or expel the member from the organization. These tough measures make the members adhere to the rules and regulations of the organization. When a member is subjected to completion of several hours of CPE, the organization aims at improving the level of professional competence (Ibrahim, 2002).
The AICPA should make the professional code of conduct clear and easy to understand to all members. The organization should aim to revise the structure and change the wording to make the ethics more consistent. This will enable members to understand the ethics of their profession and be in a position to avoid breach of the same. All cases of breach of conduct should be dealt with by the state CPA boards or passed to the AICPA trial board (Allen, 2011).
Allen, C. (2011). Improving the code of professional conduct. Web.
American Institute of Certified Public Accountants: Professional Code of Conduct-current Version. Web.
Ibrahim, B. (2002). Accounting codes of conduct violation and disciplinary action. Web.
Maughan, J.(2011). Basic accounting codes of ethics. Web.
Shroyer, T. (2008). Violation of professional ethics in malpractice litigation. Minnesota: Moss &Benett.