This webinar was hosted by McKonly & Asbury Partners, Janice Snyder and Michael Hoffner and reviewed the structure of the current AICPA Code of Professional Conduct as well as provided an overview of how CPAs in both Public Practice and serving in Industry should interpret the requirements therein. The presenters went through the outline of the Code, explaining where to find various components of the regulations and providing a series of examples to illustrate the application of the framework.

1. Professional Ethics for CPAs
What the Rules Say and
How to Interpret Them
Michael Hoffner, Partner
Janice Snyder, Partner

4. Professional Ethics for CPAs
What the Rules Say and
How to Interpret Them
Michael Hoffner, Partner
Janice Snyder, Partner

5. Introductions
Michael Hoffner, Partner
mhoffner@macpas.com
Janice Snyder, Partner
jsnyder@macpas.com

6. Session Objectives
• Standard Setting Process
• Code of Professional Conduct
• Enforcement Process

7. Ethics in the News

8. Ethics in the News

9. Standard Setting Process
AICPA Professional Ethics Division
• PEEC: Professional Ethics Executive Committee
• Senior committee of the AICPA, charged with interpreting / enforcing the AICPA
Code of Professional Conduct (The Code)
• Also charged with promulgating new interpretations and rulings, monitoring
existing rules, and making revisions as needed.
• Roots traced back to the “American Association of Public Accountants’
Committee on Ethics” – formed in 1906
• 20 to 21 members who are appointed annually by the Chair of the AICPA Board
of Directors (3 compensated non-CPAs and 17-18 volunteer members).

10. Standard Setting Process
• PEEC’s Standard Setting Process
• Quarterly meetings, which are open to the public
• Deliberates emerging issues and those brought to its attention via member
inquiry
• Maintains a Three-Year agenda
• Exposure drafts issued with at least 60 days of open comment period prior to
publishing new standards

11. Code of Professional Conduct
Organized by Topic based on a Conceptual Framework approach
Preface: All Members
3 Parts
1. Members in Public Practice
2. Members in Business
3. All other members (retired, unemployed)

12. Code of Professional Conduct
Conceptual Framework
• Incorporate a “Threats and Safeguards” approach, designed to assist
users in analyzing relationships and circumstances that the code does not
specifically address
• Under this approach, users:
• Identify threats to compliance with the rules
• Evaluate the significance of those threats to determine if it is at an
acceptable level
• If not at an acceptable level, users apply safeguards to eliminate the threats
or reduce them to an acceptable level

13. AICPA – Conceptual Framework

16. Code of Professional Conduct
Responsibilities
Principle Public Interest
Principle
Integrity Principle
Objectivity and
Independence
Principle
Due Care
Principle
Scope & Nature
of Services
Principle
Preface: All Members
6 Principles

17. Code of Professional Conduct
Preface: All Members
• Responsibilities principle In carrying out their responsibilities as professionals,
members should exercise sensitive professional and moral judgments in all their
activities.
• The public interest principle Members should accept the obligation to act in a way
that will serve the public interest, honor the public trust, and demonstrate a
commitment to professionalism.
• Integrity principle To maintain and broaden public confidence, members should
perform all professional responsibilities with the highest sense of integrity.
• Objectivity and independence principle A member should maintain objectivity and
be free of conflicts of interest in discharging professional responsibilities. A member
in public practice should be independent in fact and appearance when providing
auditing and other attestation services.

18. Code of Professional Conduct
Preface: All Members (continued)
• Due care principle A member should observe the profession’s technical and ethical
standards, strive continually to improve competence and the quality of services, and
discharge professional responsibility to the best of the member’s ability.
• Scope & nature of services principle A member in public practice should observe the
Principles of the Code of Professional Conduct in determining the scope and nature
of services to be provided.

19. Code of Professional Conduct
Part 1 – Members in Public Practice
• Public Practice: the performance of professional services for a client by a
member or a member’s firm. Also includes Governmental Auditors working in
a government audit org.
• Conceptual Framework:
A. Identify threats
• Relationships or circumstances that could compromise a member’s compliance with the rules.
B. Evaluate the significance of a threat
• Acceptable level. A level at which a reasonable and informed third party who is aware of the
relevant information would be expected to conclude that a member’s compliance with the
rules is not compromised.
C. Identify and apply safeguards
• Actions or other measures that may eliminate a threat or reduce a threat to an acceptable level

20. Code of Professional Conduct
• Conceptual Framework (Continued)
• Many threats fall into one or more of the following seven broad categories:
• Adverse Interest
• Advocacy
• Familiarity
• Management Participation
• Self-Interest
• Self-Review
• Undue Influence

21. Code of Professional Conduct
• Conceptual Framework (Continued)
• Safeguards that may eliminate a threat or reduce it to an acceptable level fall into
three broad categories:
• Safeguards created by the profession, legislation, or regulation.
• Safeguards implemented by the client. It is not possible to rely solely on
safeguards implemented by the client to eliminate or reduce significant threats
to an acceptable level.
• Safeguards implemented by the firm, including policies and procedures to
implement professional and regulatory requirements.

22. Code of Professional Conduct
Part 1 – Members in Public Practice
Rules and Interpretations
• Integrity and Objectivity (Conflicts of Interest) (8 pages)
• Director positions, gifts and entertainment, knowing misrepresentations, etc.
• Independence (67 pages)
• General matters, network firms, non-attest services, contractual matters, unpaid fees,
financial interests, trustee responsibilities, loans/leases, family relationships, more gifts
and entertainment, litigation, and many more!
• Other areas with Interpretations include:
• General Standards, Compliance with Standards, Accounting Principles, Acts
Discreditable, Fees and Remuneration, Advertising and Solicitation, Confidential
Information, and Form of Organization and Name (collectively 20 pages)

23. Code of Professional Conduct
Part 2 – Members in Business
• Structured very similar to Part 1
• Threats / Safeguards similar, tailored with specific definitions and
interpretations towards individuals in business vs. those in public practice
• Identify Threats
• Evaluate Significance of Threat
• Identify and Apply Safeguards

24. Code of Professional Conduct
Part 2 – Members in Business
Rules and Interpretations
• Integrity and Objectivity (5 pages)
• Conflicts of Interest
• Applicable to a members interactions with or service to an employing organization, vendor,
customer, lender, shareholder or other party.
• Gifts and Entertainment
• Applicable to gifts to and gifts from a customer or vendor of the members employer
• Knowing Misrepresentations of Information
• Subordination of Judgement
• Other rules/interpretations include (total 5 pages)
• General Standards, Compliance with Standards, Accounting Principles, and Acts Discreditable

25. Code of Professional Conduct
Part 3 – Other Members
• Retired / Between Employment / Other
• Focus Area: Acts Discreditable to the Profession
• Discrimination in Employment Practices
• Solicitation / Disclosure of CPA Exam Questions and Answers
• Failure to File a Tax Return or Pay a Tax Liability
• Disclosure of Confidential Information Obtained from Former Employer or
Volunteer Activities

26. Enforcement Process
Joint Ethics Enforcement Program (JEEP)
• “The purpose of the JEEP agreement between the AICPA and a state society is
to permit joint enforcement of their respective codes of professional conduct
with respect to a member of either or both by means of a single investigation
and, if warranted, a single settlement agreement or joint trial board hearing.”
(JEEP Manual of Procedures, Dec. 2006)

27. Enforcement Process
Summary of the JEEP process
• Complaint is filed
• Preliminary inquiry and analysis
• Respondents are identified
• Case investigator is assigned
• Opening letters are sent to respondents
• Evidence and interviews are collected
• Case is presented to the committee
• Committee votes on case and outcome

28. Enforcement Process
Possible conclusions of an investigation
• No violation
• If there is no evidence of a violation, the investigation will be closed.
• Required corrective action (RCA)
• The actions generally include CPE or pre-issuance reviews of engagements.
• Settlement agreement
• In lieu of referring the case to the Joint Trial Board, the committee may, at its discretion,
choose to offer the respondent a non-negotiable settlement agreement.
• Referral to the Joint Trial Board (JTB)
• The panel may find a respondent not guilty or, if a guilty verdict is issued, may expel or
suspend the respondent’s membership, admonish the respondent, or take additional action
as it considers appropriate. A respondent may appeal a guilty verdict.

29. Questions
Michael Hoffner, Partner
mhoffner@macpas.com
Janice Snyder, Partner
jsnyder@macpas.com