Question

compare and contrast the various sources of authoritative guidance for ethical conduct when providing accounting services.

Answer 1

Solution:-

Sharp increases in the number of multinational audits being performed by U.S. accounting firms means that more CPAs are performing services under the International Federation of Accountants (IFAC) audit and attest standards. Although auditors must comply with the specific standards adopted in each jurisdiction, familiarity with IFAC’s International Ethics Standards Board for Accountants (IESBA) Code of Ethics for Professional Accountants (IESBA Code) in addition to the AICPA Code of Professional Conduct (AICPA Code) is a critical first step. When specifications differ, members should comply with the more restrictive of the applicable standards.

COMPARING THE AICPA CODE TO THE GLOBAL STANDARD

The IESBA Code sets the global standard for the accountancy profession. The Code, available at tinyurl.com/372k2wg, was updated and revised in July 2009. The revisions clarified the requirements for all professional accountants and significantly strengthened the independence requirements. The new code is effective Jan. 1, 2011, with early adoption permitted. Several transitional provisions have been incorporated to allow professionals and firms time to implement the more stringent standards.

More similar than different. The IESBA and AICPA codes are more similar than different although some differences are significant. Though this article will focus mainly on the differences, in many cases, applying the codes to the same fact pattern will yield similar results. Also, some differences reflect formatting approaches and drafting conventions. For example, the IESBA Code is divided into three parts: Part A applies to all professional accountants; Part B, only to persons in public accounting; and Part C, to persons in business, in other words, everyone who is not in public practice. The AICPA does not apportion its principles and rules in this manner. Other differences are more substantive.

As for similarities, both codes address areas such as independence, due care, confidentiality and the truthful reporting of information. The principles underlying each code are also similar except that the IESBA addresses confidentiality and marketing as principles (the latter under professional behavior), applicable to all professionals, whereas the AICPA Code includes these as rules applicable to members in public practice. The IESBA ethics requirements for professional accountants in business, such as corporate accountants, are much like those found in the AICPA Code although certain IESBA guidance is more comprehensive (for example, inducements, acting with sufficient expertise).

Ethics Codification Project. In December 2008, the AICPA launched an Ethics Codification Project to reformat and enhance its ethics literature. Today, the literature exists in multiple locations, such that similar subject matters are sometimes disjointed, making it difficult for members to know for certain whether they have considered all the relevant matters. Similar to the FASB Accounting Standards Codification, the AICPA ethics literature will be put into a logically structured, topical format and redrafted using consistent wording conventions and styles. PEEC is re-evaluating ethics guidance that is outside the AICPA Code (for example, informal AICPA staff positions and basis for conclusions documents, which carry no authority but provide helpful guidance or background on the rules) to determine whether that guidance should be proposed for inclusion in the Codification as part of the authoritative standards.

The primary objective of the Codification Project is to improve the Code by making it topical and easier to use. Other important goals are to improve research capability through technology and to enhance the clarity of the Code. At the time this article was developed, PEEC’s Codification Task Force was considering the IESBA Code as a structural model for the Codification. AICPA members who perform audit and attest services under IFAC standards may find it simpler to understand any differences and comply with both codes if they are structured similarly. This approach is also consistent with recommendations in the U.S. Treasury Department’s Advisory Committee on the

Auditing Profession’s October 2008 report to promote the understanding of and compliance with professional independence requirements.