CPA Ethics - Ethical Responsibilities of Accountants
The CPA code of ethics is instrumental in the accounting profession for a variety of reasons - so much so that the governing body of accounting, the AICPA, has established a written set of principles that outlines the major ethical responsibilities to which accountants should adhere in order to maintain their CPA licenses.
The ethical responsibilities of accountants are so important because the financial implications of ethical lapses and poor judgment can be enormous. Intentionally or inadvertently sharing a client’s or a firm’s financial information in violation of a CPA code of ethics can have wide-ranging consequences for all parties. If CPA ethics and CPA ethical standards are violated, the repercussions can be devastating, ranging from the loss of business for an accounting firm, to a CPA losing their job to criminal prosecution.
For example, in September, the Securities and Exchange Commission (SEC) charged a former Rite Aid compliance executive with insider trading after a 2017 incident in which he sold $1 million of personal stock in Rite Aid upon learning that the FTC would likely delay approval of a planned merger with Walgreens.
Accountants are entrusted with a massive responsibility—organizing and helping to manage an organization’s or an individual’s finances. And that responsibility comes with a corresponding high demand for trust.
It’s obvious that maintaining ethical responsibilities should be of the utmost importance to any and all accounting professionals. But what do these responsibilities entail, specifically? Becker breaks down the major ethical duties of the modern accountant, and how to ensure they are being fulfilled.
What are the ethical responsibilities of accountants?
How can CPA ethics and the ethical responsibilities of accountants be defined? The Code of Professional Conduct from the American Institute of CPAs (AICPA) and the Code of Ethics from the International Ethics Standards Board for Accountants (IESBA) both prescribe a CPA code of ethics, addressing numerous standards of ethical behavior in the accounting profession. The IESBA establishes five key ethical principles for accountants. These are:
· Professional competence and due care
· Professional behavior
The principles of CPA ethics can be summarized as committing to working at the highest levels of one’s technical competency (i.e., not taking shortcuts for expediency’s sake), not using or sharing confidential information for personal gain or to benefit another party and maintaining independence (aka, avoiding potential conflicts of interest.)
The AICPA Code of Professional Conduct, like the IESBA Code of Ethics, addresses these and other accounting and ethical issues in detail. For working accountants aspiring to take the CPA Exam and become certified public accountants, as well as CPAs looking to meet the AICPA’s continuing professional education (CPE) requirements, Becker offers a variety of CPA ethics courses on topics such as maintaining professional ethics in a culture of oversharing, trends and proposed changes to ethics interpretations, and government ethics and independence.
How critical is a commitment to CPA ethical standards? Patrice Johnson, Director of CPE Curriculum for Becker, notes that she has seen more accountants fired for ethics violations than for reasons related to technical proficiency or competency.
While technical mistakes are not desired, in many cases, accountants can recover from a technical mistake if they openly communicate the error once identified and correct it; however, “It’s often bad ethical decision-making that leads to (accountants) being released from their jobs,” says Johnson.
What ethical issues and situations are accountants likely to encounter?
Whether it’s hastily signing-off on a workpaper that you know hasn’t been thoroughly reviewed or willfully overlooking a potential conflict of interest between an accountant and a client, ethical lapses often arise from perceived time constraints, Johnson says. When people think they don’t have time to follow CPA ethics best practices—whether in continuing education reporting or in being duly diligent about client review—they sometimes look for shortcuts that can wind up jeopardizing their career and the success of their firm.
“Where people get themselves stuck or caught is (with) time,” Johnson says. “There’s no margin in their schedule, so they’re looking at tight deadlines and they feel very pressured and they end up making somewhat poor decisions.”
Raising red flags early about a potential ethical issue can help accountants avoid stressful, pressure-cooker situations that can arise as a deadline approaches. “If there are any concerns you have,” Johnson advises, “Raise the red flag as soon as possible so that you’re not forcing yourself to take some type of shortcut.”
Of course, perceptions of time constraints aren’t behind all bad decisions. Sometimes, a desire to capitalize on confidential information—for financial gain or as an exercise of influence—leads to violations of the public trust.
“People are going to think the (accountant) who is going to excel the most is technically the most sharp,” says Johnson. “However, I believe that a large part of success comes with the individuals who prove themselves to be good decision-makers and make good ethical choices.”
CPA professional ethics - the bottom line
Accounting firms, for their part, can reinforce a culture of ethical behavior and emphasize that adhering to CPA ethical standards is the firm’s top priority by conducting regular internal ethics training for staff, Johnson adds. Larger accounting firms also often maintain ethics hotlines that employees can call if they suspect improper behavior.
Ethical considerations in the accounting profession are ever-evolving. To stay abreast of trends, regulatory changes and best practices, accountants need to prioritize ethics continuing education. Taking ethics education seriously can help promote overall ethical behavior in the accounting profession to keep the field as respected and trusted as it has always been.
Becker can help you stay on top of the CPA code of ethics by providing a wide range of courses addressing both national and state-level CPA ethics developments. Get started with Becker’s ethics courses today.