Ethics plays a vital role in terms of helping accounting professionals to cope with the people who rely on the services that they offer. People who rely on the services that accounting professionals offer expect the financial statements of their firms to be dependable and free from bias (Mason, 2011). Therefore, most people who join the accounting profession should maintain outstanding ethical standards. The goal of this paper, therefore, is to identify cases where CPAs violate Rule 102-Integrity and Objectivity, Rule 201-Professional Competence, Rule 202-Compliance with Standards, and Rule 501- Discreditable Act. It will examine the expectations of the code, show how CPAs violate the code, outline the disciplinary actions that AICPA should adopt, demonstrate whether the disciplinary actions taken are appropriate, and determine how AICPA can prevent these types of breaches from occurring in the future.
Rule 102-Integrity and Objectivity
While undertaking professional services, accountants should maintain high levels of integrity and objectivity. In this case, accounting professionals should ensure that they do not get involved in incidences that relate to conflicts of interest. Moreover, they should ensure that they do not falsify facts knowingly (Crawford & Loyd, 2008). The Code of Professional Ethics and Conduct is governed by two principles. These include integrity and objectivity. As a result, CPAs should make judgments based on the guidelines that are stipulated in Rule 102 (American Institute of Certified Public Accountants, 2010).
For example, Mr. Bassman violated Rule 102 when he signed an agreement with the Joint Ethics Enforcement Program in 2011. In this case, Mr. Bassman was suspended from AICPA for two years because he allowed public administrative proceedings to take place while knowing that they violated Rule 102(e). Rule 102(e) describes the practices that govern the operations of the Security and Exchange Commission (American Institute of Certified Public Accountants, 2010).
As a result, the disciplinary action that Mr. Bassman was subjected to was fair. In this case, failure to take any action on Mr. Bassman would encourage other CPAs to adopt a similar trend. As a result, the reputation of the accounting profession would be ruined. To prevent this type of breach from occurring in the future, AICPA should investigate all proceedings that are organized by CPAs and ensure that they are in line with AICPA’s Code of Professional Ethics and Conduct.
Rule 201-Professional Competence
Professional Competence requires accountants to perform their duties proficiently. In this case, a CPA must plan and manage the performance of specialized services efficiently. Moreover, a CPA should obtain sufficient data so that he can manage to make logical conclusions and recommendations (Crawford & Loyd, 2008). In this case, an accountant demonstrates a lack of competency when he carries out transactions with a client before collecting sufficient information about the nature of the transaction.
For example, Mr. Geoffrey White was issued with a letter of admonition in August 2011 by the Disciplinary and Ethics Commission for breaching the AICPA Code of Professional Ethics and Conduct. Mr. White acted in an incompetent manner when he recommended an inappropriate real estate loan to his client. He also lied to the commission that his client was an accredited investor. I, therefore, agree with the disciplinary action that Mr. White was subjected to by AICPA. Therefore, to prevent this type of breach from occurring in the future, AICPA should investigate the conduct of CPAs and dismiss the ones who are incompetent in their duties.
Rule 202- Compliance with Standards
Professional services such as auditing, compilation, and management consulting should comply with the standards that are set by AICPA. In this case, accountants should ensure that they observe technical standards that are set forth by bodies that are certified by AICPA. However, studies reveal that there are those CPAs who transact business with bodies that have not been certified by the Federal Tax Division of AICPA. This leads such firms into trouble with the US Treasury Department (Jeffrey, 2012). As a result, AICPA is mandated to summon such CPAs so that they can justify their actions.
For example, Mr. Doyle violated Rule 202 in August 2010 when he failed to issue a report that was brought to his attention. The report was returned to him for corrections since the original report contained errors. Moreover, Mr. Doyle allowed a non-CPA to issue the report. The financial statements that Mr. Doyle issued also contained material errors (American Institute of Certified Public Accountants, 2010). Therefore, since Mr. Doyle failed to comply with AICPA standards, he was suspended from the organization for two years. I, therefore, agree with the disciplinary action that Mr. Doyle was subjected to because he allowed an incompetent person to perform his duties. Therefore, to prevent this type of breach from occurring in the future, AICPA should ensure that the perpetrators of the breach are expelled from the organization to safeguard its reputation.
Rule 501- Discreditable Act
Accountants should maintain confidentiality in all the activities that they undertake. For instance, they should not reveal information that contains personal data from a previous employer. When a CPA is hired by a new company, he should not disclose private information that he acquired from his previous employer to gain an advantage (Jeffrey, 2012). For example, an accountant who helps an auditor to make decisions regarding the performance of an organization is regarded as discreditable. This makes AICPA subject such a CPA to disciplinary action.
For example, Mr. George Kresslein was accused of misappropriating $60,000 that belonged to his client. He opened a bank account while using his client’s name to take advantage of the funds. After a thorough investigation, Mr. Kresslein was charged with violating AICPA’s Code of Professional Conduct. He was expelled from AICPA because he acted in a discreditable manner (American Institute of Certified Public Accountants, 2010). I, therefore, agree with the disciplinary action that Mr. Kresslein was subjected to. This is because the act that Mr. Kresslein engaged in ruined the reputation of his organization. Therefore, to prevent this type of breach from occurring in the future, AICPA should hire external evaluators to monitor the activities of CPAs in order to ensure that they perform their duties in an efficient manner.
From the analysis, therefore, it is true that CPAs play a vital role in an organization. They can build or destroy the reputation of an organization. In this perspective, therefore, they need to be subjected to constant surveillance to ensure that they engage in activities that are acceptable in society. As a result, AICPA subjects CPAs to disciplinary actions whenever they breach the Code of Professional Ethics and Conduct in order to ensure that they do not ruin the reputation of the organization. Therefore, since the most valuable possession of a CPA is good reputation, he should ensure that he maintains outstanding ethical standards thereby building the reputation of AICPA.
American Institute of Certified Public Accountants. (2010). AICPA Code of Professional Conduct. Jersey City: American Institute of Certified Public Accountants.
Crawford, M. A., & Loyd, S. D. (2008). CPA’s Multistate Guide to Ethics and Professional Conduct. New York: CCH.
Jeffrey, C. (2012). Research on Professional Responsibility and Ethics in Accounting. London: Emerald Group Publishing.
Mason, P. (2011). Elementary accounting. California: Foundation Press.