6 principles in the AICPA's CPC

Codes of Conduct

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Society consists of many groups of job classifications, such as industrial

worker, service provider, management, and professionals. Professional jobs

include doctors, dentists, attorneys, and accountants. All of these

professionals are not only required to fulfill the day-to-day job duties but are

also required to adhere to a professional code of conduct.

Medical doctors adhere to the Hippocratic Oath, and the attorney's oath

requires that they act, at all times, in the best interest of their clients, even if

they think or know their client is guilty.

In the business world, there is a code of conduct, particularly for the senior

officers (the CEO and CFO in particular) of a publicly owned firm. Individuals

occupying these roles must take on a fiduciary responsibility to their

shareholders, requiring them to make all decisions in the best interests of

their shareholders. The concept of fiduciary responsibility goes back

centuries, becoming part of English law and eventually part of American

jurisprudence via a landmark U.S. Supreme Court case in 1846 (Johnston,

2009). The decisions of the senior officers must also be "at arm's-length,"

meaning they must completely disregard any personal impact of any decision

they make. For example, if the CEO has a large number of stock options and

makes a decision primarily in a manner to benefit himself, such as cashing in

his stock options, he would not be acting in a fiduciary manner.

The same kind of professional code of conduct applies to accountants in the AICPA Code of Conduct (Code of Professional Conduct, 2010):

The Code of Professional Conduct (Code) was adopted by the AICPA

membership to provide guidance and rules to all members—those in

public practice, in industry, in government, and in education—in the

performance of their professional responsibilities.

Instead of advising professional accountants on the basics of how to fulfill

their job responsibilities, it provides guidance regarding the manner of doing

their job. While accountants' day-to-day activities may require them to

prepare financial statements for firms, that in and of itself does not define

how they should go about collecting the information and presenting it.

Should accountants buy stock in the companies they are auditing, as

the results of their audits could impact the companies' stock prices?

Should an accountant—upon direction from a firm's president who

happens to be a friend—change the value of formerly obsolete, low-

Codes of Conduct

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value merchandise to full-value merchandise, so as to make that period's reported profits better?

While the actions one should take in these situations may not be defined in

any GAAP accounting guidebook, the expected actions are surely dictated by

the AICPA Code of Conduct, which consists of seven sections, plus an

introduction and appendices. Each section provides guidance in different areas of how the accountants should conduct themselves:

Section 300 covers professional accountants' responsibilities to

clients. It gives accountants guidance on confidentiality and how they

should be responsible for the actions of third parties who they may

engage to assist them in client activities.

Section 100 deals with an accountant's need to be truly independent

from clients in terms of loans they may ask for or future employment

opportunities they may seek. This section also gives guidance about

what kind of relationships accountants can or cannot have with potential or current clients, so as to maintain their needed objectivity.

References

Code of professional conduct. (2010). Retrieved from the AICPA Web

site: http://www.aicpa.org/Professional+Resources/Professional+Ethic s+Code+of+Professional+Conduct/Code+of+Professional+Conduct/

Johnston, J. F. Jr. (2009). Natural law and the fiduciary duties of business

managers. Retrieved from the Action Institute Web

site: http://www.acton.org/publications/mandm/mandm_article_16.ph

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