Aug 04, 2014

Big Changes Ahead for Ethics Code

By Allison M. Henry, CPA, CGMA, PICPA Vice President - Professional & Technical Standards

ethicsThe AICPA’s Professional Ethics Executive Committee (PEEC) recently released a reformatted Code of Professional Conduct. The new code is greatly improved and much easier to use. It is divided into sections based on practice areas, topically organized, and searchable. It also includes links to nonauthoritative practice aids. The language has been modernized to enhance clarity, and the code applies standard drafting conventions, uses consistent wording, uses the active voice, removes legalistic terms, minimizes the use of qualifiers (such as usually, ordinarily, normally), and eliminates footnotes.

The intent of the codification project was to retain the original meaning in the code, but the reformatted version incorporates several substantive changes, including the incorporation of two new conceptual framework interpretations (one for members in public practice and one for members in industry). These new conceptual frameworks apply to ethics situations in the absence of specific guidance in the code. The revisions include several other clarifying changes that are explained in a PowerPoint on the AICPA’s Codification Project website.

In addition to the codification, PEEC approved several significant changes to the code that should not be overlooked, such as those made to the guidance on confidentiality,subordination of judgment, and conflicts of interest. The guidance on confidentiality and subordination of judgment are currently in effect, but the conflict of interest guidance and the new codification are effective Dec. 15, 2014, with the exception of the two new conceptual frameworks, which are effective Dec. 15, 2015.

PEEC is proposing new guidance on breaches of an independence interpretation that, under certain circumstances, may permit a firm with an independence breach to retain its attest client. This proposal represents a significant shift in the guidance and stems from guidance that was recently approved by the International Ethics Standards Board for Accountants (IESBA). The IESBA is also working on guidance that would permit a practitioner to report a suspected fraud to regulatory authorities. The AICPA’s PEEC is likely to consider similar changes once the IESBA has finalized its guidance.  How can you keep up with all of these changes? Ethics CPE is a great way to learn about these changes in more depth. If you have any questions about recent changes, or comments for PICPA’s ethics committee regarding the proposed changes, please reach out to me at ahenry@picpa.

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Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of PICPA officers or members. The information contained in herein does not constitute accounting, legal, or professional advice. For professional advice, please engage or consult a qualified professional.