Code of Professional Ethics by American Institute of Certified Public Accountants


"A code of professional ethics is a voluntary assumption of self discipline
above and beyond the requirements of the law. The Code of Ethical Conduct serves
the highly practical purpose to notify the public that the profession will
protect the public interest" (Carey, Doherty: p 3). When people need a doctor, a
lawyer or a certified public accountant, they seek someone whom they can trust
to do a good job, not for himself but for them. People assume that the hired
professional is qualified since they cannot appraise him. They must take it on
faith that he is competent. That is why professionals are distinguished from
businesses and why there is a need for ethical regulations.

The Code of Professional Ethics

The Code of Professional Ethics for public accountants was developed by the
American Institute of Public Accountant and includes four different categories.
The first, Concepts of Professional Ethics, establishes major requirements for
CPAs in different areas of their day-to-day professional activities. The main
parts of the Code are: Independence, Integrity and Objectivity in the practice
of public accounting, Competence and technical standards, Responsibilities to
clients, Responsibilities to colleagues and Other responsibilities and
Practices. Independence has always been the fundamental concept to the
accounting profession. In fact it is the most essential to the practice of all
professions. The financial reports produced by CPAs would be of little value to
the public unless CPAs maintain their independence. Independence has always been
associated with integrity and objectivity. Since faults on financial
statements may be the result of either a honest mistake or a lack of integrity
it is imperative to associate the notion of independence with the objectivity
and integrity. As part of the requirements by the Code of ethics, CPA should
avoid any relationships that may result in the CPA\'s becoming dependent on the
particular client. Such relationships include financial interests and client
management. It is very important that the opinion of the CPA reflects the
results of operating decisions taken by the client and not any underlying ideas
which may be the case if a CPA takes part in the decision making process of the

Another important issue discussed in the Code of ethics is competence and
responsibility of CPAs. It establishes a basic ethical obligation that a CPA
shall not render any services which he is not competent to render. Within this
topic, the code mentions continuing improvement of the competence of CPAs in all
areas in which they engage. In fact, the requirements of competence are
established by law. If a man renders a service he is not familiar with, he
commits a fraud on the public (However, CPAs are supposed in a reasonable manner
to carry this principle beyond). The code of ethics assumes that in situations
where CPAs face a problem he/she is not familiar with, they may ask other
practitioners for help. A CPA may drop the case only when his/her efforts prove
to be futile. From the other standpoint, there are always unknowns in every
profession. Thus, to assume that every practitioner is completely knowledgeable
would be inaccurate.

Responsibilities to Clients include CPAs\' maintaining their independence,
integrity and objectivity regardless of any personal interest that previously
exists. CPAs should hold in confidence, all the information about their clients
which they acquire during engagements. However the Code states that CPAs should
insist on disclosing in financial reports, all information necessary for the
fair presentation of the clients\' affairs.

The accountancy laws in some states of the USA contain provisions which do not
require disclosing information obtained during engagement by accountant in any
court. These clauses directly interfere with federal jurisdiction. Federal
courts have held that a "state statute conferring privileged status on
communications to accountants does not apply to a Federal administrative
proceedings" (Carey and Doherty: p. 133) and may require disclosure of the
information by CPA.

With reference to the Responsibilities to Colleagues, good relations within a
profession are very important because they aid in the exchange information and
opinions. "The public confidence in professional accounting is gained mainly by
cumulative accomplishments of all CPAs" (AICPA, Section 55, article 01).
Successful professionals in accounting do not hide secrets from what they have
learned from their experience. They share their ideas with other practitioners
who address them directly or publish articles in professional publications,
through speeches and professional meetings.

The code prescribes assisting colleagues in complying with the code of ethics
and disclosing cases of its enforcement.

Basically, the principles of responsibilities to fellow practitioners described
in the Code do not establish the limits of professional conduct. They define