Professional Ethics: AICPA's Comprehensive Course

This revised interactive multimedia CD-ROM course teaches you and your staff the AICPA, SEC and GAO independence rules in an inventive and creative way. Through interactive case studies, exercises and illustrative graphics, you will learn the most up-to-date AICPA, SEC and GAO rules, including those adopted under the Sarbanes-Oxley Act.

This course also explains the AICPA Code of Professional Conduct, which all members of the AICPA must follow. It covers the basic tenets of ethical and professional conduct, covering the principles of ethics, and it explains why the code is necessary and how it is organized.

Objective
This course combines the objectives listed under the Independence course and the objectives listed under the Selected Topics in Professional Ethics course

Prerequisite None

Value Aid! Includes printable files of related rules and interpretations

Note: This course consists of information from the Independence course and the Selected Topics in Professional Ethics course. Those who have taken Independence cannot claim credit for both Independence and Professional Ethics: The AICPA’s Comprehensive Course. Those who have taken Independence and want to learn about other ethics topics should take Selected Topics in Professional Ethics.

• Analyze the importance of independence and why you must be independent both in
  fact and in appearance.
  
• Define a “covered member” for the purposes of applying independence standards.
  
• Identify family relationships that could impair your and your firm’s independence.
  
• List which restricted entities you must be independent of.
  
• Identify the financial relationships between you and your clients that impair
  independence.
  
• Identify the non-attest services that, if performed for an attest client, will impair
  independence.
  
• Identify the business relationships between firm personnel and clients that will impair
  independence.
  
• Locate the various independence rules and the circumstances under which they apply,
  including the major differences between the AICPA and the SEC rules.
  
• Implement ISB Standard No. 1.
  
• Define a code of conduct.
  
• List the general principles that serve as a foundation to the Code.
  
• Apply the provisions of the Code related to integrity, objectivity, due care,
  compliance with standards, and competence.
  
• Explain why client information should be kept confidential.
  
• Assess contingency fee issues related to certain tax matters, commissions, and referral
  fees.
  
• Identify acts discreditable to the profession, particularly those related to the retention
  of client records.
  
• Apply the ethics rules relating to tax practice, advertising, form of organization, and
  firm name.
  

Introduction
This course teaches the most up-to-date AICPA, SEC, and GAO independence requirements,
including those adopted under the Sarbanes-Oxley Act, and ISB Standard No. 1. It also explains
the AICPA’s Code of Professional Conduct, which all members of the AICPA must follow, and
the reasoning, philosophy, and application of that Code. The course also analyzes the basic tenets

Introduction to Independence
You Just Inherited $300,000
Suppose you just inherited $300,000. You’ve been very careful about being responsible with this
money–no flamboyant new car, no new house, and not even an expensive vacation. Before you
do anything impetuous with your newfound wealth, you want to make sure it’s properly invested.
Half the money you put into your stock-based retirement account. $30,000 you consider “mad
money.” You put it into a six-month certificate of deposit and figure, when it matures, you’ll
treat yourself to some really cool things.

You’ve still got $120,000 left. What to do?

You think the smartest thing to do would be to diversify your holdings. You just put $150,000
into the stock market, and the best thing to do would be to invest the remaining into real estate.
But how do you know what to invest in? You’re turned off by all the financial advisors who
seem to be more interested in making a commission than in helping you find the right investment
for you.

The Real Estate Deal
Desperate for objective advice, you ask your best friend what to do. She tells you that she has a
friend from church who is a real estate lawyer. Before calling her lawyer friend, you did some
checking around and discovered that he was well-known and respected within the business
community. You phone the real estate lawyer and he tells you:

I know how difficult it is to find the right investment for your money. Real estate is a wise
choice, and what I’d recommend is HCL Realty Investors. I’ve got my kids’ college
money invested with them. They have a wide variety of investment options and the
management is really top notch. My own parents are invested with HCL and so are my
grandparents.

After listening to the lawyer, rate the quality of his advice. If 1 means “advice is worse than the
typical sales person” and 10 means “great advice–I’ll do exactly what the person said,” how
would you rate the usefulness of the opinion? Circle your answer.

Oh…one more thing
Before hanging up the phone, you mentioned how impressed you were with the lawyer’s
knowledge of HCL Realty. Here’s what the lawyer said in response:

I hope you think I’m knowledgeable! I’m the president of the company. I better know
what I’m selling. So, how about it? Will you send that check today?

After that last bit of information from your best friend’s acquaintance from church, how valuable
is the advice now? Choose one.

a. It’s even more valuable now than it was before.
b. What he said makes no difference to me.
c. The advice is a lot less valuable than it was.

We All Need Objective Advice From Time to Time
There are times in life where what we need is some objective advice.

Your best friend’s acquaintance from church clearly had a ringing endorsement for HCL Realty,
and you were impressed that this person had a great deal of his own money invested in it.
Overall, you were really impressed with the sincerity and credentials of this person. You had the
sense that he was really looking out for your own best interests.

And then…

The value of the advice is hopelessly impaired once you find out that your best friend’s
acquaintance stands to benefit personally from the recommendation. Perhaps the lawyer really
does believe that HCL Realty Investors offers the best value to meet your financial objectives,
but because he’s president of the company, you’ll always have some doubt concerning whether
he’s looking out for himself or for you.

You’ve made the most natural connection between objectivity and independence. But what
exactly does objectivity mean for a CPA?

Objectivity and Independence
Objectivity is a state of mind, a quality that lends value to the services you provide your clients.
Objectivity is a distinguishing feature of the public accounting profession. The principle of
objectivity imposes the obligation to be impartial, intellectually honest, and free of conflicts of
interest. Independence precludes relationships that may appear to impair your objectivity in
rendering attestation services.

Investors, creditors and other decision-makers rely on the public accounting profession to
provide objective independent judgments concerning financial and other information about other
companies. As someone who is associated with a public accounting firm, it is your responsibility to
make sure that your views continue to have value as an objective assessment of a client’s situation.

The Buck Stops Here
It doesn’t matter whether or not you are a CPA, work as an auditor, or sign your firm’s name to
an opinion. Just by being employed by a public accounting firm (professional services firm), you
are required to follow the independence rules. In this regard, the AICPA has established a Code
of Professional Conduct for its members to address the professional’s responsibility to his or her
clients, the public, and fellow colleagues.

Definition of member: A member, associate member, or international associate of the American
Institute of Certified Public Accountants.

President Harry Truman had a sign on his desk that read “The Buck Stops Here.” When it comes
to matters of independence, you would be wise to remember that saying.

Maintaining independence is your responsibility. Your firm will have policies and procedures to
help you maintain independence, but ultimately the responsibility for complying with the various
independence rules is yours and yours alone.

Compliance with the independence requirements depends primarily on your having a good
understanding of the rules and voluntarily following them.

What This Course Is All About
In this course, you’ll learn more about the various rules relating to independence and
professional ethics and how they apply to your firm, to you as an employee of your firm, to your
spouse or equivalent, and to your dependents. The overall objective of this course is to give you
a better understanding of and appreciation for the independence rules and to help you better
apply these rules in practice.

Specifically, at the end of this course, you will be able to:

• Analyze the importance of independence and why you must be independent both in
  fact and in appearance.
• Define a “covered member” for the purposes of applying independence standards.
• Identify family relationships that could impair your and your firm’s independence.
• List which restricted entities you must be independent of.
• Identify the financial relationships between you and your clients that impair
  independence.
• Identify the non-attest services that, if performed for an attest client, will impair
  independence.
• Identify the business relationships between firm personnel and clients that will impair
  independence.