AICPA Code of Professional Conduct: What accountants need to know

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What is the AICPA Code of Professional Conduct?

AICPA Code of Professional Conduct summary

AICPA Code of Conduct citations

Why should accountants follow the Code of Professional Conduct?

The AICPA Code vs. the IESBA International Code of Ethics

Accountant integrity and responsibility

As trusted advisors to their clients, it is important that accounting professionals are transparent, unbiased, ethical, and serve clients with the utmost integrity. Of course, the fundamental principles of objectivity, integrity, due care, and independence have long been instilled into the profession, but having a formal set of principles, rules, and interpretations in place helps drive uniformity and success. That is why members of the American Institute of CPAs (AICPA) are required to follow the guidance of the AICPA Code of Professional Conduct.

The value of a professional conduct code dates back well over 100 years. In 1907, accountant Joseph Edmund Sterrett spoke at the annual meeting of the American Association of Public Accountants, voicing the importance of ethics and setting in motion the notion of a code of professional conduct. Ten years later, in 1917, the American Institute of Accountants issued the earliest “official” version of the Code. Today, all members of the AICPA are bound by the current AICPA Code of Professional Conduct.

So, what does the AICPA Code of Professional Conduct mean for today’s professionals? Let’s take a closer look.

What is the AICPA Code of Professional Conduct?

The AICPA Code of Professional Conduct, which is commonly referred to as the AICPA Code of Conduct or the AICPA Code, is a set of rules, principles, and interpretations that guide accountants as they serve their clients.

As explained by the AICPA, the AICPA Code of Conduct requires members to “act with integrity, objectivity, due care, competence, fully disclose any conflicts of interest (and obtain client consent if a conflict exists), maintain client confidentiality, disclose to the client any commission or referral fees, and serve the public interest when providing financial services.”

The AICPA Code of Professional Conduct has been revised throughout the years, with the most significant revision to date taking place in 2014. Today, the evolution of the AICPA Code of Conduct continues in an effort to keep pace with changes impacting the profession.

Who does the code of conduct apply to?

All AICPA members are required to follow the AICPA Code of Conduct. To further clarify, this means that even members who are not CPAs are bound to the Code.

As further explained by Stephanie Lanke, Senior Audit and Accounting Consultant for AuditWatch at Thomson Reuters, “The AICPA Code of Professional Conduct applies to all individuals (CPAs or otherwise) who are members of the AICPA. By definition, this includes members (someone who has completed the requirements for CPA licensure), associate and affiliate members (accounting and finance professionals who have not passed the exam or are not certified), or international associates (members of partner organizations).”

It should be noted that certain state CPA societies and state boards of accountancy have incorporated all, or parts, of the code into their own rules of conduct. This means that even if an accountant is not a member of the AICPA, they may be subject to the same or similar requirements by their state or other regulators.

AICPA Code of Professional Conduct summary

The AICPA Code of Conduct is comprehensive and divided into three main parts (outside of the preface). Those three parts are as follows:

• Part 1: Members in public practice. For example, members who work for a CPA firm.

• Part 2: Members in business. For example, members who work with or in industry, nonprofit organizations, the public sector (e.g. government) regulatory bodies, etc. This includes employment, contractual, or volunteer work.

• Part 3: Other members. This means members who are neither members in practice, nor members in business. For example, the member is retired or not employed.

Each portion of the Code has its own set of guidelines and definitions so depending on a member’s role, they would follow that respective part of the Code. However, a member can be subject to multiple parts of the Code.

Added Lanke, “Certain rules are similar across Parts 1 and 2, and tailored for whether the members are in practice or in business. For example, Part 1 includes expanded details on independence and due professional care, and Part 2 includes additional guidance related to pressure to breach the rules. A member can also be subject to multiple parts of the code. For example, a partner at a CPA firm, who also volunteers on the board of a nonprofit organization, would apply Part 1 of the Code for their role as partner, and Part 2 of the Code for their volunteer role on the board.”

AICPA Code of Conduct citations

When the AICPA issued the revised code in June 2014, a mapping document in Appendix D was created to help users better understand where content from the prior code appears in the revised code.

As explained by the AICPA, the first two columns of the mapping document identify the citation and title where the content resided in the prior code. The second two columns identify the citation and title where the content resides in the revised code.

How do you decipher the numeric citations (i.e., 0.200.030.04, 1.400.005, etc.)? As outlined in the Code of Conduct, the numeric citations are as follows:

• The single digit that begins the citation refers to the part in which the content resides (i.e., Part 1, Part 2, or Part 3). This means that content from the preface begins with the single digit 0.XXX.XXX. Content for Part 1 begins with a 1.XXX.XXX, Part 2 begins with 2.XXX.XXX, and Part 3 with a 3.XXX.XXX.

• Next are two sets of three-digit numbers that identify the topics and, when applicable, subtopics or sections. When a topic, subtopic or section appears in two or more parts of the code, the same number is used. For example, the “Acts Discreditable Rule” appears in Parts 1, 2, and 3 and the citations for this rule are 1.400.001, 2.400.001, and 3.400.001, respectively. Accordingly, the two sets of three-digit numbers remain the same with only the first digit changing.

• All bracketed section references, such as [0.200.030.04], for example, refer to sections within the Code of Conduct. [No prior reference: new content]

• If only two digits appear, this means that those digits represent the paragraph number.

Research tool The AICPA Professional Library available through Checkpoint is a powerful research tool that features the most comprehensive and current accounting and auditing information.

Why should accountants follow the Code of Professional Conduct?

As previously mentioned, the fundamental principles of objectivity, integrity, due care, and independence have long been instilled into the accounting profession. And, for many years, the public has held the accounting profession in high regard given its strong ethical standards. However, in today’s increasingly complex financial and tech-driven environment, it is especially important for accountants to have guidance in performing their duties. Even if they are not CPAs in public practice.

“If an accountant is not a member of the AICPA, the Code of Professional Conduct still provides valuable guidance to a practitioner to ensure that they are following best practices widely accepted by the profession. Whether they’re a member or not, there is an underlying expectation for both the public and among peers that accounting and finance professionals act in a manner that is ethical, transparent, and unbiased,” said Lanke.

Continued Lanke, “Following the Code helps to provide clarity on what that means. The Code of Professional Conduct also provides valuable guidance for navigating challenging ethical issues that arise for many accounting professionals. In addition to specific rules, there is also a Conceptual Framework that can be applied for situations not specifically addressed in the Code — this involves identifying if there is a potential threat, evaluating its significance, and identifying and applying safeguards, and evaluating the safeguard’s ongoing effectiveness.”

The AICPA Code vs. the IESBA International Code of Ethics

Some professionals may be wondering how the AICPA Code of Conduct compares with the International Ethics Standards Board for Accountants (IESBA) Code of Ethics for Professional Accountants, and for good reason.

In today’s global business environment, a growing number of U.S. accounting firms are performing multinational audits. Therefore, it is critical that accountants be familiar with the IESBA Code, which was issued by the International Federation of Accountants (IFAC). The IESBA Code establishes principles of ethics for the millions of professional accountants who are IFAC members.

There are many similarities between the AICPA Code and IESBA Code. In fact, the two are more similar than different. That being said, there are several notable distinctions to consider. Such differences, as outlined by Lanke, include the following:

Applicability

The AICPA Code of Conduct applies only to members of the AICPA, and the principles and standards in the United States. The IESBA International Code of Ethics is intended to be applied globally, taking into account the various practices, standards, legal, and regulatory requirements for multiple countries. Given the global reach of many organizations, it is critical to determine which Code of Ethics may apply.

Rules-based vs. principles-based 

The AICPA Code is considered to be more rules-based, meaning there are more specific rules and guidelines to follow. The IESBA Code is more principles-based, providing a framework that’s applicable in numerous situations.

Non-compliance

Compared with the AICPA Code of Conduct, the IESBA Code includes more specific guidance on how to deal with non-compliance with laws and regulations (NOCLAR). While the AICPA Code of Conduct was recently updated for NOCLAR, it primarily follows IESBA and there are several differences that make them relevant for AICPA members in the United States.

Accountant integrity and responsibility

In today’s challenging and ever-changing landscape, following the AICPA Code of Conduct, or a similar professional conduct statement, is vital to gaining clients’ trust as you help them navigate complexities in business.

Many accountants fail to realize that similar concepts are included in the GAAP Framework, for example, Principles 2 and 10:

• Principle 2 – The Principle of Sincerity, which notes that an entity’s accounting (and accountants) should provide an accurate, complete, and objective picture of the entity’s financial statements, and  
• Principle 10 – The Principle of Utmost Good Faith maintains that those involved in the accounting process are to be truthful and honest in reporting and recording transactions.

With the aid of a robust artificial intelligence (AI)-powered research tool, such as Thomson Reuters Checkpoint Edge, that quickly surfaces answers about the AICPA standards, accountants can save valuable time while staying compliant.

“Members in both practice and business must be able to navigate multiple ethical questions throughout their careers. One of the primary foundations of the AICPA Code of Professional Conduct is the recognition that there is no way to anticipate every situation that may compromise a member’s integrity, objectivity, and/or independence,” said Lanke. “Members must carefully weigh the facts, circumstances, and appearance in each situation, and consider the appropriate guidance.”

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