AICPA Code of Professional Conduct · Other Responsibilities and Practices · ET Section 501 - Acts Discreditable

ET Section 501
Acts Discreditable

.01Rule 501—Acts discreditable.A member shall not commit an act discreditable to the profession.

[As adopted January 12, 1988.]

Interpretations Under Rule 501-Acts Discreditable

.02501-1—Retention of client records. Retention of client records after a demand is made for them is an act discreditable to the profession in violation of rule 501 [ET section 501.01]. The fact that the statutes of the state in which a member practices may grant the member a lien on certain records in his or her possession does not change this ethical standard.

A client's records are any accounting or other records belonging to the client that were provided to the member by or on behalf of the client. If an engagement is terminated prior to completion, the member is required to return only client records.

A member's workpapers-including, but not limited to, analyses and schedules prepared by the client at the request of the member-are the member's property, not client records, and need not be made available.

In some instances a member's workpapers contain information that is not reflected in the client's books and records, with the result that the client's financial information is incomplete. This would include (1) adjusting, closing, combining or consolidating journal entries and (2) information normally contained in books of original entry and general ledgers or subsidiary ledgers. In those instances when an engagement has been completed, such information should also be made available to the client upon request. However, the member may require that fees due the member with respect to such completed engagements be paid before such information is provided.

Once the member has complied with the foregoing requirements, he or she need not comply with any subsequent requests to again provide such information.

.03501-2—Discrimination and harassment in employment practices.Whenever a member is finally determined by a court of competent jurisdiction to have violated any of the antidiscrimination laws of the United States or any state or municipality thereof, including those related to sexual and other forms of harassment, or has waived or lost his/her right of appeal after a hearing by an administrative agency, the member will be presumed to have committed an act discreditable to the profession in violation of rule 501 [ET section 501.01].

[Revised, effective November 30, 1997, by the Professional Ethics Executive Committee.]

.04501-3—Failure to follow standards and/or procedures or other requirements in governmental audits. Engagements for audits of government grants, government units or other recipients of government monies typically require that such audits be in compliance with government audit standards, guides, procedures, statutes, rules, and regulations, in addition to generally accepted auditing standards. If a member has accepted such an engagement and undertakes an obligation to follow specified government audit standards, guides, procedures, statutes, rules and regulations, in addition to generally accepted auditing standards, he is obligated to follow such requirements. Failure to do so is an act discreditable to the profession in violation of rule 501 [ET section 501.01], unless the member discloses in his report the fact that such requirements were not followed and the reasons therefore.

.05501-4—Negligence in the preparation of financial statements or records. A member shall be considered to have committed an act discreditable to the profession in violation of rule 501 [ET section 501.01] when, by virtue of his or her negligence, such member—

  1. Makes, or permits or directs another to make, materially false and misleading entries in the financial statements or records of an entity; or
  2. Fails to correct an entity's financial statements that are materially false and misleading when the member has the authority to record an entry; or
  3. Signs, or permits or directs another to sign, a document containing materially false and misleading information.

[Revised, effective May 31, 1999, by the Professional Ethics Executive Committee.]

.06501-5—Failure to follow requirements of governmental bodies, commissions, or other regulatory agencies in performing attest or similar services. Many governmental bodies, commissions or other regulatory agencies have established requirements such as audit standards, guides, rules, and regulations that members are required to follow in performing attest or similar services for clients subject to their jurisdiction. For example, the Securities and Exchange Commission, Federal Communications Commission, state insurance commissions, and other regulatory agencies have established such requirements.

When a member agrees to perform an attest or similar service for the purpose of reporting to such bodies, commissions, or regulatory agencies, the member should follow such requirements, in addition to generally accepted auditing standards (where applicable). Failure to substantially follow such requirements is an act discreditable to the profession, unless the member discloses in his or her report that such requirements were not followed and the reasons therefore. Not following such requirements could require the member to modify his or her report.

If the agency requires additional disclosures of the auditor, they must be made in accordance with the disclosure requirements established by the governmental body, commission or other regulatory agency. Failure to substantially follow such requirements is an act discreditable to the profession.

[Effective August 31, 1989.]

.07501-6—Solicitation or disclosure of CPA examination questions and answers. A member who solicits or knowingly discloses the May 1996 or later Uniform CPA Examination question(s) and/or answer(s) without the written authorization of the AICPA shall be considered to have committed an act discreditable to the profession in violation of rule 501 [ET section 501.01].

[Effective January 31, 1996. Revised, effective May 31, 1996, by the Professional Ethics Executive Committee.]

.08501-7—Failure to File Tax Return or Pay Tax Liability. A member who fails to comply with applicable federal, state, or local laws or regulations regarding the timely filing of his or her personal tax returns or tax returns of the member's firm, or the timely remittance of all payroll and other taxes collected on behalf of others, may be considered to have committed an act discreditable to the profession in violation of rule 501 [ET section 501.01].

[Effective May 31, 1999]


Back
©2000 AICPA