Academic journal article Journal of Accountancy

Ethics Keeps Up with New World Order

Academic journal article Journal of Accountancy

Ethics Keeps Up with New World Order

Article excerpt

CPAs practicing in nontraditional structures--such as American Express--will not be working in a professional ethics vacuum. New guidance from the professional ethics executive committee (PEEC) clearly spells out the applicability of the Code of Professional Conduct to CPAs in any type of entity and requires public accountants to adhere to independence standards no matter where they practice.

PEEC describes a fictional parent company called PublicCo (see chart, above), which owns a number of financial services companies. PublicCo buys some accounting firms, and--as described in "`Alternative Structures' and Government Accountants" (JofA, June98, page 16)--some CPAs in the purchased firms offer consulting and other nonattest services to clients on behalf of their new employers. Audit partners in the purchased firm, however, form Newfirm to continue to offer client attest services. These partners own a majority of Newfirm and may lease employees, office space and back-office functions such as billing from PublicCo. But how will this new practice structure maintain its independence?

For example, PEEC recognized a possible problem when owners of Newfirm had to work with a "direct superior"--a senior manager at the professional services subsidiary (see chart). …

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