Codification

Codification

• Divided into separate parts– first part applicable to all members … covers:• structure of the AICPA Code• principles of professional conduct• defined terms that are used in the • non-authoritative guidance• new, revised, and pending interpretations

Codification

• Remaining three parts divided according to member‘s practice– Part 1 … public practice– Part 2 … business & industry– Part 3 … all others • such as those who are retired or unemployed

Codification Substantive Changes

• Added two conceptual framework interpretations :– Conceptual Framework for Members in Business‖ – Conceptual Framework for Members in Public

• Self-review threat:– expanded to cover judgments made or work

performed by an individual currently with the firm who was previously associated with the client

Codification

• Impossible to cover every possible relationship or circumstance

• Two conceptual frameworks outline a “threats and safeguards approach”– a way of identifying, evaluating, & addressing

threats to compliance resulting from a specific relationship or circumstance

– required to use threats and safeguards approach only when no guidance on point

“the Committee found the proposed revisions to be beneficial to members. The layout is easy to read and user-friendly. The Committee believes the “conceptual framework approach” with two interpretations … is the right approach. The revised Code contains good examples and improved guidance for members.”

Independence

• June 2012 Exposure / Approved January 29, 2013• PEEC amended 101-3 to:– withdraw a requirement that impairs independence if

a CPA designs or maintains internal controls for an attest client• effective for engagements covering periods beginning on or after

December 15, 2013. Early implementation allowed.

– clarify that preparation of financial statements, in whole or in part, is a non attest service • Effective for engagements covering periods beginning on or after

December 15, 2014. Early implementation NOT allowed

Independence

• Minor amendments to definition of:– “Professional Services”– “Public Practice”

• Delete definition of:– “Holding Out”

Installment 1: Honesty and IntegrityNovember 30, 2012

2012 Report Card on the Ethics of American Youth

Lying, Cheating And Stealing Among American Students Drops

• Students admitted they had cheated on an exam in the past year– 2010 – 59%– 2012 – 51%

• Lied to a teacher in the past year about something significant– 2010 – 61%– 2012 – 55%

• Stolen something from a store in the past year.– 2010 – 27%– 2012 – 20%

Lying, Cheating And Stealing Among American Students Drops

• 99% - “it is important for me to be a person with good character”

• 93% - satisfied with their own ethics & character

• 81% - believe that when it comes to doing what is right, they are better than most people they know

Millennials Significantly More Likely to Let the Ends Justify the Means

Percentage of Workers Who Strongly Agree/Agree to Look the Other Way if Company did Something Questionable

More Experienced Workers Consult Company Resources For Help With Work Related Issues,

Where Younger Workers Consult Family

When employees feel they work in an organization where ethical conduct matters, they are more likely

to be engaged in their jobs.

Insights About the Generations

• The younger the worker– more social interaction influences their perceptions about

ethics• The older the employee�

– more hierarchy, structure and visible company commitment matter

• Culture makes a difference for all generations�– Younger workers

• culture is the sum of their interactions with other individuals, much of which interaction is with coworkers.

– Older workers• get their cues about culture from company’s stated values,

messages from the top, and their beliefs about the organization as a whole.

Ethics Disciplinary Actions2012-13

• Terminations – automatic– Stacy Sheedy• Rule 501 – Acts Discreditable

– Charles Spillman• Failure to comply with required corrective action• AICPA terminated also

Ethics Disciplinary Actions2012-13

• Suspensions – 2 – Suspension # 1• Rule 501-7 – Failure to file tax return or pay tax

liability– AICPA and IRS suspension also

– Suspension # 2• Rule 501 – Acts Discreditable• Rule 502 – Advertising and Other Forms of

Solicitation

Ethics Disciplinary Actions2012-13

• Rule 591.191 – Removing Client Files From an Accounting Firm

• Rule 501 – Acts Discreditable– Held out as a CPA with an expired license.

• Rule 501 – Acts Discreditable – Did not observe requirements Circular 230

• Rule 202 – Compliance with Standards• Rule 203 – Accounting Principles

Ethics Disciplinary Actions2012-13

• Other cases– 3 – No violation or no further action– 1 – Deferral due to litigation– Non member complaints• 2 – Referred to AICPA• 2 – Referred to Attorney General