Question

Using the AICPA Code of Professional Conduct (the Code), imagine an ethical situation that arises in your work involving you. Discuss whether you can resolve it using the Code. Are there any limitations to the guidance that the Code provides? If yes, what are they and what sources might you look to resolve your ethical dilemma? Try to think of a situation not directly addressed by the Code which causes you to need to use one of the “decision trees.”

Answer 1

Before pursuing a course of action to resolve ethical dilemmas, a member may want to consult with legal counsel, applicable professional bodies, and appropriate firm or employer personnel. The AICPA provides an ethics hotline to assist members in this and other ethics issues. Inquiries can be made by phone, 888-777-7077 (menu option 5, followed by menu option 2), or via e-mail at [email protected]. Members may be well-advised to document the ethical conflict’s substance, details of discussions and suggested decisions.

ETHICAL CONFLICTS UNRELATED TO THREATS

Members may confront ethical conflicts due to internal or external work-environment pressures or conflicts within professional standards unrelated to threats described above. For example, a member may encounter a fraud and feel ethically bound to report it; but reporting the fraud could breach Rule 301’s mandate to maintain client confidentiality. To resolve such ethical conflicts and comply with the rules, the guide recommends that members:

a. Recognize and consider all relevant facts and circumstances, including applicable rules, laws or regulations,

b. Consider the ethical issues involved,

c. Consider established internal procedures, and then

d. Formulate alternative courses of action.

After weighing the consequences of each course of action, the member should select the course that best enables compliance with the rules.

All AICPA members must comply with rules 102–505 of the AICPA’s Code of Professional Conduct. The recently issued AICPA Guide for Complying with Rules 102–505 provides a prudent, though not required, “threats and safeguards” approach to help members solve ethical dilemmas in situations not explicitl addressed in the code’s rules, interpretations or rulings. The guide defines six categories of threats to complying with the rules and analyzes strategies for identifying and applying safeguards to eliminate or reduce threats to acceptable levels. The guide also discusses “ethical conflict resolution” for situations where members encounter obstacles to following appropriate courses of action.

When no safeguard can reduce a significant threat to an acceptable level or when an ethical conflict remains unresolved, members will probably not comply with the rules, requiring them to consider declining or discontinuing the service, withdrawing from the engagement team or specific assignment, or even resigning from the client or employment position.

Examples of Threats to Compliance With AICPA Rules of Conduct

Situation: As part of an attest engagement, a member uses consulting work previously done by his firm.

Threat: Self-review and self-interest threats to compliance with rules 102 and 201.

Situation: A member has charged his employer with violating certain labor laws.

Threat: Adverse interest threat to compliance with Rule 102.

Situation: An employer pressures a member to be associated with misleading information.

Threat: Undue influence threat to compliiance with rules 102 and 201.

Situation: A member is directed to complete a task within an unrealistic time frame.

Threat: Undue influence threat to compliance with rules 102 and 201.

Situation: Revenue received from a single client is significant to the firm.

Threat: Self-interest threat to compliance with Rule 102.