Improving the Code of Professional Conduct: Revised Structure, Wording Will Make Ethics Standards More Consistent
Allen, Catherine, Journal of Accountancy
* The Professional Ethics Executive Committee (PEEC) will apply drafting and style conventions to the entire Code to improve consistency and make it clearer.
* PEEC will recast several provisions to reflect the application of the conceptual framework approach, a significant change since very few rules today mention these concepts.
* The preliminary structure includes a new numbering system and two-part organization. The preface will describe the structure of the codification, its application, and the principles and underlying definitions. Part 1 will apply to members in public practice. Part 2 will apply to members working in other areas of the profession, such as academia, government and private industry.
* Both parts will include broad topics, subtopics and interpretive sections. Each part will contain several broad topics that align with relevant rules of conduct. Some topics will have one or more subtopics. Sections, which will come under these topics or subtopics, will interpret the rules.
The AICPA's Professional Ethics Executive Committee (PEEC) is undertaking a project to recodify the Institute s ethics standards. The Ethics Codification Project s primary focus is to improve the AICPA Code of Professional Conduct so that members and others can apply the rules and reach correct conclusions more easily. To achieve this, PEEC will restructure the Code into topical areas, edit the Code using consistent drafting and style conventions, and revise certain Code provisions (primarily independence) to reflect the "conceptual framework" approach. PEEC will expose the restructured and redrafted Code for public comment before considering it for final adoption.
TIME TO REORGANIZE
The AICPA Code is being rewritten and restructured for the same reasons that FASB created its Accounting Standards Codification (ASC). The AICPA's project, though, is on a much smaller scale than the FASB ASC, which simplified user access by reorganizing authoritative U.S. GAAP into a single, searchable code.
While the AICPA Code is technically "codified" today, some subjects are scattered about the Code, making it more difficult for members and other users to know whether they have considered all relevant standards. In addition, a substantial amount of nonauthoritative ethics guidance is found outside the Code. These materials include informal AICPA staff positions; frequently asked questions on nonattest services; and basis-for-conclusions documents that can help members better understand and apply certain ethics rules. The Codification Project gives PEEC an opportunity to re-evaluate that guidance, where it resides, and its connection to the Code. Some of that material may become authoritative through this process.
As a member body of the International Federation of Accountants (IFAC), the AICPA agrees to have ethics standards that at a minimum meet the ethics standards issued by the International Ethics Standards Board for Accountants (IESBA). Since 2001, the AICPA Code has been converging with the IESBA Code of Ethics for Professional Accountants. For example, in 2006, PEEC adopted as an authoritative standard the Conceptual Framework for AICPA Independence Standards (AICPA Framework [ET [section] 101-1]), and, in 2010, PEEC adopted an independence standard on network firms (ET [section] 101.19). The conceptual framework and the network firm standard are integral parts of the IESBA Code; the former lays the foundation for the entire code. PEEC's Codification Project will continue to consider convergence issues.
WHAT IS A CONCEPTUAL FRAMEWORK?
A conceptual framework helps members comply with ethics requirements (see "Comparing the Ethics Codes: AICPA and IFAC," Oct. 2010, page 24). For example, the AICPA framework defines several concepts and terms (such as independence, threat, safeguard and acceptable level), and provides examples of different types of threats and safeguards. …