Ethical standards are important in any business, but they become crucial when you deal with people’s financials. As an accountant, you get to participate in other people's lives by balancing their checkbooks, giving financial advice, and much more, which puts a huge responsibility on your shoulders.
So, whether you're starting out or you're well into your career in the industry, ethical standards should be in the focus of your practice. For this, you need to get acquainted with the American Institute of CPAs, or AICPA’s Code of Professional Conduct.
Becoming a CPA means not only passing the exam and getting the license and taking on the job itself; it also means being familiar with the CPA’s ethical standards. So this Code provides the minimum ethical standards needed for you to practice daily and to avoid penalties and/or disciplinary action. Being aware of these guidelines will not only help you avoid potential lawsuits, but will also streamline your accounting processes.
A Brief Review of The Code
The AICPA Code of Professional Conduct will provide you an ethical framework for all accountants that includes these four core components: Rules, Principles, Interpretation, and Ethics Ruling. The Rules are the set of ethical standards that resemble a legal code; the minimum ethical standards CPAs must meet.
Only those rules are enforced against CPAs, but Principle provides you as an accountant more detailed guidelines that elaborate on the rules. Interpretations are the limitations of the Rules, while the Ethics Ruling are summaries of prior investigations done by the AICPA and state societies.
Core Ethics for Accountants
The Code guides all accountants in conducting themselves in ways that help protect the profession’s integrity. One of the more significant points is that CPAs can’t work with other individuals and business clients that could or will have a conflict of interest.
For example, if you work for a Fortune 500 company that holds a significant amount of stock investment in another company, and you then act as an accountant for them, a conflict could arise. The Code will ask the accountant to remove themselves from that situation, so no other discrepancies occur.
The Code also requires the account to be competent in the work they do, as they are handling sensitive, legal information. They are also expected to be knowledgeable on the subject that they are discussing with their clients.
Obligations of the Client
A large portion of the Code protects your clients and future clients from unethical behavior. They cover a CPSs obligation to keep all information related to the client confidential, with restrictions on charging clients contingency fees. There is also a Code of Conduct on how to appropriately advertise yourselves so that you don’t intentionally, or unintentionally mislead the public.
Violating The Code
If you’re a member of the AICPA, or a state CPA society, or both, you’ll be subjected to the same laws and regulations as the Code. If you violate any of the Codes ethics, an investigation will take place by the Joint Ethics Enforcement Program or JEEP. JEEP is a collaborative program between the US and the AICPA.
Being accused of an ethics violation means you’ll receive a notification through the mail. Information about what ethics violation took place with ensure. Depending on which violation you were accused of the outcome of the investigation could be the dismissal of the complaint, penalties, having to take a course, or admonishment and permanent or temporary revocation of membership.
A severe violation could even result in jail time, though this is unlikely. If a severe violation does occur, you’re more likely to have a permanent revocation of your CPA license. With the potential of these penalties occurring, it’s crucial for you to read over the CPAs ethical standards completely before offering any financial advice, advertising, or balancing a checkbook.
Author Bio: Bryce Welker is an active speaker, blogger, and tutor on accounting and finance. As the Founder of Crush The CPA Exam, he has helped thousands of candidates pass the CPA exam on their first attempt.