Question

Logon to the AICPA’s site and examine the Code of Professional Conduct to answer these questions:

• Who is included in the public interest to which the accounting profession has responsibility? Be able to explain the Principles of Professional Conduct (0.300), which includes the responsibilities of: Integrity; Objectivity and Independence; and Due Care.
• What are the rules regarding contingent fees (1.510)?

Answer 1

Who is included in the public interest to which the accounting profession has responsibility?

The “public” should be inclusive of all individuals and groups because the responsibilities of the profession impact every aspect of society: consumers, suppliers and taxpayers. The responsibilities of the profession are designed to protect certain “interests” of the public

Be able to explain the Principles of Professional Conduct (0.300), which includes the responsibilities of: Integrity; Objectivity and Independence; and Due Care.

Membership in the American Institute of Certified Public Accountants is voluntary. By accepting membership, a member assumes an obligation of self-discipline above and beyond the requirements of laws and regulations. .02 These Principles of the Code of Professional Conduct of the American Institute of Certified Public Accountants express the profession’s recognition of its responsibilities to the public, to clients, and to colleagues. They guide members in the performance of their professional responsibilities and express the basic tenets of ethical and professional conduct. The Principles call for an unswerving commitment to honorable behavior, even at the sacrifice of personal advantage

0.300.020 Responsibilities .01

Responsibilities principle. In carrying out their responsibilities as professionals, members should exercise sensitive professional and moral judgments in all their activities. .02 As professionals, members perform an essential role in society. Consistent with that role, members of the American Institute of Certified Public Accountants have responsibilities to all those who use their professional services. Members also have a continuing responsibility to cooperate with each other to improve the art of accounting, maintain the public’s confidence, and carry out the profession’s special responsibilities for self-governance. The collective efforts of all members are required to maintain and enhance the traditions of the profession

0.300.040 Integrity .01 Integrity principle.

To maintain and broaden public confidence, members should perform all professional responsibilities with the highest sense of integrity. .02 Integrity is an element of character fundamental to professional recognition. It is the quality from which the public trust derives and the benchmark against which a member must ultimately test all decisions. .03 Integrity requires a member to be, among other things, honest and candid within the constraints of client confidentiality. Service and the public trust should not be subordinated to personal gain and advantage. Integrity can accommodate the inadvertent error and honest difference of opinion; it cannot accommodate deceit or subordination of principle.

0.300.050 Objectivity and Independence .

01 Objectivity and independence principle. A member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities. A member in public practice should be independent in fact and appearance when providing auditing and other attestation services.

Objectivity is a state of mind, a quality that lends value to a member’s services. It is a distinguishing feature of the profession. The principle of objectivity imposes the obligation to be impartial, intellectually honest, and free of conflicts of interest. Independence precludes relationships that may appear to impair a member’s objectivity in rendering attestation services.

For a member in public practice, the maintenance of objectivity and independence requires a continuing assessment of client relationships and public responsibility. Such a member who provides auditing and other attestation services should be independent in fact and appearance. In providing all other services, a member should maintain objectivity and avoid conflicts of interest. .05 Although members not in public practice cannot maintain the appearance of independence, they nevertheless have the responsibility to maintain objectivity in rendering professional services. Members employed by others to prepare financial statements or to perform auditing, tax, or consulting services are charged with the same responsibility for objectivity as members in public practice and must be scrupulous in their application of generally accepted accounting principles and candid in all their dealings with members in public practice.

.01 Due care principle.

A member should observe the profession’s technical and ethical standards, strive continually to improve competence and the quality of services, and discharge professional responsibility to the best of the member’s ability. .02 The quest for excellence is the essence of due care. Due care requires a member to discharge professional responsibilities with competence and diligence. It imposes the obligation to perform professional services to the best of a member’s ability, with concern for the best interest of those for whom the services are performed, and consistent with the profession’s responsibility to the public.

What are the rules regarding contingent fees (1.510)?

1)A member in public practice shall not a.

a) Perform for a contingent fee any professional services for, or receive such a fee from a client for whom the member or the member’s firm performs,

i. an audit or review of a financial statement; or

ii. a compilation of a financial statement when the member expects, or reasonably might expect, that a third party will use the financial statement and the member’s compilation report does not disclose a lack of independence; or

iii. an examination of prospective financial information; or

b. Prepare an original or amended tax return or claim for a tax refund for a contingent fee for any client

2)The prohibition in a. above applies during the period in which the member or member’s firm is engaged to perform any of the services listed above and the period covered by any historical financial statements involved in any such listed services.

3)Except as stated in the next sentence, a contingent fee is a fee established for the performance of any service pursuant to an arrangement in which no fee will be charged unless a specified finding or result is attained, or in which the amount of the fee is otherwise dependent upon the finding or result of such service. Solely for purposes of this rule, fees are not regarded as being contingent if fixed by courts or other public authorities, or, in tax matters, if determined based on the results of judicial proceedings or the findings of governmental agencies.

4)A member’s fees may vary depending,