Malcolm Rivera
Certified Public Accountants (CPAs) are held to a high standard of ethical conduct in their professional and personal lives. The American Institute of Certified Public Accountants (AICPA) Code of Professional Conduct outlines numerous ways in which CPAs can lose their professional licenses and careers. One of the most dangerous provisions in the code is acts discreditable to the profession, which can encompass a wide range of professional and personal indiscretions. While the AICPA Code does not clearly define what constitutes acts discreditable, it provides examples such as negligence in preparing financial statements, failure to comply with government bodies, discrimination, harassment, and cheating on the CPA exam. CPAs must uphold the dignity and honor of their profession, maintain high standards of personal conduct, and always act in the public interest. Therefore, it is crucial to examine whether the CPA firm's policy complies with these ethical standards and if any deviations could constitute discreditable acts.
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What You'll Learn
Deceptive conduct
CPAs must not engage in deceptive advertising or use other forms of solicitation to obtain clients. They may advertise the nature of the services provided but must not indicate a specialty designation unless they have met the requirements of the granting organisation.
Acts considered "discreditable to the profession" are those that bring harm to one's reputation or that of the profession, deviating from ethical norms and reflecting lapses in personal judgment and a failure to act with good moral character.
CPAs must adhere to the stricter rules, whether they are international standards or state board requirements, to maintain ethical conduct and avoid deceptive practices.
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Unprofessional marketing
Marketing professional services in an unprofessional manner can include making deceptive statements. For example, implying abilities not supported by education or professional attainments, asserting that services or products are of a particular quality when they are not, or creating false expectations of favourable results.
CPA firms and professionals must maintain high standards of technical competence, morality, and integrity. This includes upholding the dignity and honour of the accounting profession and maintaining high standards of personal conduct.
To ensure effective marketing while adhering to ethical standards, CPA firms can leverage the expertise of their people and utilise tools like artificial intelligence (AI) for content creation and improved marketing efficiency. The Association for Accounting Marketing (AAM) is a valuable resource for CPA firms, providing access to a network of professionals, including marketers, business developers, and firm administrators, who can help drive firm growth and sustainability.
By prioritising ethical conduct and utilising strategic marketing approaches, CPA firms can successfully promote their services while maintaining the trust and best interests of their clients.
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Personal relationships with clients
Personal relationships between CPAs and their clients can impact the CPA's ability to remain independent and objective, given the potential for conflicts of interest. The development of close personal relationships with clients and client personnel may open the door to claims of bias and can challenge the CPA's integrity and objectivity.
CPAs are expected to maintain high standards of personal conduct and morality, and to uphold the dignity and honour of the accounting profession. This includes maintaining independence of thought and action, holding client affairs in strict confidence, and continuously striving to improve professional skills. Objectivity is a critical aspect of a CPA's work, as it lends value and credibility to their services. It is important for CPAs to remain impartial and intellectually honest, free from any conflicts of interest that may arise from personal relationships with clients.
In some cases, personal relationships between CPAs and clients may not be discreditable acts in themselves. However, when these relationships lead to questionable ethical behaviour or compromise the CPA's independence and integrity, they can be considered discreditable. For example, in the case of George Bednar, a partner at Ernst & Young LLP, who spent significant amounts of money on travel and entertainment to socialise with a client's CFO and family, the close relationship created a familiarity threat to independence. Bednar's actions were considered egregious and discreditable to the profession.
To avoid engaging in discreditable conduct, CPAs should be diligent in maintaining their independence and objectivity. This includes being aware of potential conflicts of interest and taking steps to resolve them promptly. CPAs should also be cautious when sharing confidential client information and ensure that any knowledge or experience shared during the professional services provided will not be identifiable to a specific client. By prioritising integrity and professionalism, CPAs can navigate personal relationships with clients without compromising their ethical standards.
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Discrimination and harassment
Firms must address complaints of discrimination or harassment swiftly and take prompt remedial action to prevent low morale, low productivity, and potentially costly lawsuits. They should establish clear anti-discrimination and anti-harassment policies, provide training for employees and managers, and create an environment where employees feel safe to raise concerns.
Preventing discrimination and harassment by third parties, such as clients or vendors, is also crucial. While it may be challenging to address such issues, firms must strive to protect their employees from harassment by non-employees over whom they have control. Establishing a robust complaint process and promptly addressing any incidents are essential steps in this regard.
Additionally, CPA firms should be mindful of personal relationships between employees and clients that could lead to claims of bias or conflict of interest. While not all close relationships are discreditable acts, maintaining independence and objectivity is vital to upholding the highest moral character expected of the profession.
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Negligence in financial statements
Financial institutions and businesses must adhere to laws and regulations to maintain integrity and transparency. For example, the Bank Secrecy Act and the Foreign Corrupt Practices Act aim to prevent money laundering, fraud, and bribery. Negligence in financial statements can lead to regulatory scrutiny, loss of investor confidence, and reputational damage.
CPAs (Certified Public Accountants) are expected to maintain high standards of technical competence, morality, and integrity. They must uphold the dignity and honor of the accounting profession and maintain confidentiality. CPAs are responsible for providing sound financial reporting and advice, ensuring that their actions do not constitute deceptive conduct or imply abilities they do not possess.
Fiduciaries, such as board members, attorneys, trustees, and corporate officers, have a responsibility to oversee the financial accounts or assets of another party. Fiduciary negligence occurs when they fail to act on breaches of duty, either through passive behavior or active engagement in unethical practices. This can include self-dealing, making decisions for personal gain, or failing to disclose conflicts of interest.
In conclusion, negligence in financial statements can lead to significant consequences for individuals and entities involved. CPAs and fiduciaries must uphold their responsibilities and maintain high standards of conduct to protect the interests of their clients and maintain the integrity of the financial system.
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Frequently asked questions
The AICPA Code does not clearly define what constitutes "acts discreditable". However, it does provide specific examples of such conduct, most of which are ethical violations related to work performed for clients or their professional interactions with the public. These include negligence in the preparation of financial statements or records and failure to respond to requests or comply with obligations imposed by governmental bodies.
Examples of discreditable acts include discrimination, sexual harassment, and insider trading. Other examples include maintaining close personal relationships with client personnel, which can create a familiarity threat to independence and open the door to claims of bias.
Committing a discreditable act as a CPA can result in disciplinary action and even the loss of one's professional license and career. State licensing bodies have shown that they are strict when it comes to enforcing the rules and protecting the public interest.
