SalinanterjemahanLarsen Sample Chapter 01.PDF

7/24/2019 SalinanterjemahanLarsen Sample Chapter 01.PDF

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Bab Satu

Etika diAkuntansi LanjutanLingkupdari Bab Etika-kanan perilaku-telah menjadi topik diskusi selama berabad-abad. Sebagai contoh:

Dalam Nicomachean Ethics, Buku , Aristoteles !"#$-"%% S&' menulis:

() t bukanlah tugas *ang mudah untuk menjadi baik. . . . +leh karena itu, kebaikan adalah baik langka dan patut dipuji dan

mulia. Dalam &editations, Buku dan , &arcus Aurelius !%-# AD' men*atakan:

Seorang pria kemudian harus berdiri tegak, tidak terus tegak oleh orang lain. . . . /adilah engkau tegak atau dibuat tegak.

0illiam Shakespeare !12$ -22' memberikan pidato berikut dalam dua draman*a:

lago. Nama baik pria dan 3anita, Sa*ang tuanku, adalah permata ji3a mereka, *ang mencuri dompet sa*a mencuri sampah4 5tis

sesuatu, tidak ada4 56ambang Sungguh,5 tis, dan telah budak ribuan4 6api dia *ang mencuri dari sa*a nama baik sa*a merampok

sa*a *ang *ang tidak memperka*a dirin*a dan membuat sa*a miskin memang. !. +thello, "." 11-2' &o3bra*, 7arta paling

murni kali 8ana mampu Apakah reputasi bersih. . . 9ehormatan sa*a adalah hidup sa*a4 keduan*a tumbuh dalam satu4

&engambil kehormatan dari sa*a, dan kehidupan sa*a dilakukan. . . . !6ragedi aja ichard , .. ;;-#"'

6erbaru skandal akuntansi *ang dipublikasikan telah membuat jelas bah3a perilaku etis akuntan belum

memenuhi standar *ang melekat dalam kutipan di atas. Dalam artikel le* Act o8 %% !S+?', *ang resmi

pembentukan De3an @erusahaan publik akuntansi @enga3asan untuk mengatur perilaku akuntan baik dalam praktek

publik dan dalam usaha bisnis pub- dimiliki licl*berikut:.

kosakata akuntansi sekarang termasuk ketentuan sebagai

akuntansi Lucu untuk menggambarkan peregangan bentuk standar akuntansi untuk batas, tanpa substansi daritransaksi bisnis *ang mendasari atau peristi3a &emasak buku untuk menunjukkan kecurangan pelaporan keuangan

1 "Skandal Scorecard," The Wall Street Journal, 3 Oktober, 2003, hal. B1.

1

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2 Bab 1 Etika Lanjutan Akuntansi

Ban*ak topik akuntansi canggih telah menjadi sub*ek dari kedua akuntansi lucu dan memasak buku oleh

eksekuti8 akuntansi perusahaan bisnis. 9arena kepala 8i- keuangan, controller, petugas akuntansi kepala, dan para

sta8 akuntansi perusahaan ness busi- memiliki tanggung ja3ab utama untuk pen*usunan laporan keuangan dan

laporan keuangan dan men*ebarluaskan kepada pengguna, pena3aran bab ini dengan-standar etika dards tepat bagi

mereka preparers. Dalam hal ini dan selanjutn*a bab, Securities dan 9omisi perubahan &antan !SE' tindakanpenegakan hukum berurusan dengan kecurangan pelaporan keuangan dijelaskan untuk topik *ang dibahas dalam

pasal-pasal.

APAKAH PELAPORAN KEUANGAN PENIPUAN?

Berikut ini meliputi salah saji dalam laporan keuangan *ang disebabkan oleh penipuan 8i pelaporan keuangan, dan

alasan dan metode melakukan penipuan:

Salah saji *ang timbul dari kecurangan pelaporan keuangan adalah salah saji *ang disengaja atau kelalaian dari jumlah atau

pengungkapan dalam laporan keuangan untuk menipu pengguna laporan keuangan. 9ecurangan pelaporan keuangan mungkin

melibatkan tindakan seperti berikut:

&anipulasi, pemalsuan, atau perubahan catatan akuntansi atau dokumen pendukung *ang laporan keuangan disusun

9eliru di, atau kelalaian *ang disengaja dari, laporan keuangan peristi3a, tindakan trans, atau in8ormasi penting lainn*a

pen*alahgunaan Disengaja prinsip akuntansi *ang berkaitan dengan jumlah, klasi8ikasi, ner mandat presentasi, atau

pengungkapan

penipuan sering melibatkan berikut: !a' tekanan atau insenti8 untuk melakukan penipuan dan !b' kesempatan dirasakan untuk

melakukann*a . . . . &isaln*a, kecurangan pelaporan keuangan dapat dilakukan karena manajemen berada di ba3ah tekanan

untuk mencapai target laba *ang tidak realistis. @enipuan dapat disembun*ikan melalui dokumentasi dipalsukan, termasuk

pemalsuan. &isaln*a, manajemen *ang bergerak di bidang kecurangan pelaporan keuangan mungkin mencoba untuk

men*embun*ikan laporan misionaris dengan menciptakan 8aktur 8ikti8.

@enipuan juga dapat disembun*ikan melalui kolusi antara manajemen, kar*a3an, pihak ketiga atau. &isaln*a, melalui kolusi,

bukti palsu *ang mengontrol kegiatan telah per- dibentuk secara e8ekti8 dapat presented.%

CONTOH PENIPUAN KEUANGAN

@ELA@+ANSE Akuntansi dan Audit @enegakan @ers No. C%",

. &en*adari /anuari CC" pendapatan pada bulan Desember CC% dan April CC" pendapatan &aret CC", dan

arti8isial mempercepat jad3al pengiriman produk pada akhir kedua perempat, sebuah kecerdasan disebut channel

stu88ing. %. &enunda penghapusbukuan piutang tak tertagih mele3ati akhir kuartal *ang tepat.

2 AICPA Standar Proe!onal, #ol. 1, "Standar Audtn$ AS," !ec. 31%.

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Bab 1 Etika Lanjutan Akuntansi 3

/uga, menurut SE, kepala keuangan !B@A' berlebihan pendapatan tri3ulanan oleh:

. &en*adari pada kuartal *ang berakhir " &aret CC", keuntungan dari penjualan aset masa

selamakuartal *ang berakhir " /uni CC". %. mengakui sebagai aset beban tertentu selama kuartal *ang berakhir

" Desember

CC%, dan " &aret CC". ". &embuat jurnal 8ikti8 sehubungan dengan kombinasi bisnis pernah dicapai &aret

CC", e8ek dari *ang untuk mengecilkan beban piutang tak tertagih.

dalam


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4 Bab 1 Etika diLanjutan

AcaraAkuntansidi @embentukan Standar Etika untuk Akuntan &anajemen dan Eksekuti8 9euangan Sea=ie3

Simposium C; Fpa*a a3al untuk menetapkan standar etika untuk pembuat laporan keuangan terjadi pada C;

simposium dari anggota A@A, E, ederasi Analis 9euangan, dan Associates obert &orris !sebuah organisasi

pemberi kredit', *ang berlangsung di Sea=ie3 ountr* lub, Absecon, Ne3 /erse*. &akalah dan diskusi pada

simposium ini mengkritik kurangn*a kode etik bagi anggota E, mengingat bah3a tiga organisasi ticipating-partailain pun*a codes.$

Ekuitas Dana @enipuan C;" @ada tahun C;", sebuah penipuan besar, sekitar sembilan durasi tahun, ditemukan di

EGuit* @endanaan orporation o8 America !EGuit*', seorang penjual reksa dana saham *ang dijaminkan oleh

in=estor untuk mendapatkan pinjaman untuk membia*ai premi asuransi ji3a. Selama periode sembilan tahun,

setidakn*a H $".. dari pendapatan sebelum pajak 8ikti8 dihasilkan-masa di mana Ekuitas melaporkan laba

bersih sebesar H ;2.., bukann*a kerugian sebelum pajak riil dengan total lebih dari H 2; million.1 penipuan

ini dilakukan oleh setidakn*a eksekuti8 dari EGuit*, termasuk E+ !E+', kepala keuangan !+', controller,

dan bendahara4 beberapa eksekuti8 *ang @A dengan pengalaman akuntan publik. &elakukan penipuan @A ini,

semuan*a mungkin memiliki pada satu 3aktu pernah tunduk 9ode A@A Etik @ro8esional selama karir akuntansi

publik mereka, dilengkapi bukti *ang jelas tentang perlun*a kode etik untuk akuntan manajemen dan eksekuti8

keuangan lainn*a.

Action oleh &A pada tahun C#", 9& mengeluarkan Standar @erilaku Etis untuk @raktisi &anajemen Akuntansi

dan &anajemen 9euangan, *ang ketiga dalam serangkaian Laporan dari &anagement ment Akuntansi. Standar &A

saat ini, *ang disajikan dalam Lampiran pada akhir bab ini !halaman # sampai ', menutupi ke3ajiban

manajemen akuntan untuk kompetensi, kerahasiaan, integritas, dan objekti=itas, dan mereka memberikan bimbingan

untuk arutan res- dari etika kon8lik. Iang perlu diperhatikan dalam pembukaan standar !halaman #-C' adalah

ke3ajiban manajemen akuntan untuk tidak membenarkan pelanggaran standar oleh orang lain dalam organisasi.

Action oleh E 9ode Etik pertama *ang diumumkan oleh E pada tahun C#1 dan sebagaimana telah diubah

adalah dalam Lampiran % !halaman -'. &eskipun singkat dari standar &A, ers kode-perjanjian *ang E

dasarn*a 3ila*ah *ang sama perilaku pro8esional seperti melakukan standar &A.

9omisi 6read3a* ekomendasi 9omisi Nasional @elaporan 9euangan @enipuan !6read3a* ommission', *ang

telah disponsori oleh A@A, *ang &A, E, *ang sociation Amerika akuntansi As- !terutama terdiri dari pendidikakuntansi', dan nstitut tor internal Audi-, mengeluarkan laporan pada tahun C#;. De8ining kecurangan pelaporan

keuangan sebagai


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Bab 1 Etika di Akuntansi Lanjutan 5

laporan,


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6 Bab 1 Etika diAkuntansi Lanjutan

anggota*ang tidak berlatih dalam @A 8irm. demikian, Aturan %, %, %%, %", "%, dan 1 dari 9ode

@erilaku @ro8esional dalam Lampiran " !halaman melalui %' berlaku untuk semua anggota A@A, termasuk di

industri s3asta, badan pemerintah, organisasi-organisasi nirlaba, dan akademisi.

9e3enangan @erusahaan @ublik Akuntansi De3an @enga3as /udul Sarbanes-+>le* Act o8 %% resmi @erusahaan

@ublik Akuntansi De3an @enga3as untuk menetapkan standar etika untuk audit perusahaan milik publik. Sampaidengan tanggal tulisan ini, tidak ada standar seperti telah dikeluarkan.

Analisis Standar Etika untuk Akuntan &anajemen dan 9euangan Eksekuti8 @eninjauan isi &A, E, dan A@A

etika pern*ataan di di>es Appen- , %, dan " mengungkapkan beberapa kesamaan. 9etiga membutuhkan anggota

dari organisasi-organisasi masing-masing untuk menjadi kompeten, bertindak dengan integritas dan objekti=itas,

menjaga kerahasiaan in8ormasi sensiti8, hindari tindakan tidak terhormat, dan menghindari kon8lik kepentingan.

7an*a kode &A dan E khusus memerlukan komunikasi in8ormasi lengkap kepada pengguna laporan anggota

mereka4 Anggota A@A tidak langsung comparabl* di3ajibkan oleh @eraturan %%.

Aturan %" dari kode A@A membutuhkan sesuai dengan prinsip akuntansi *ang berlaku umum. +rang mungkin

lebih suka bah3a kode baik &A dan E memiliki ketentuan eksplisit *ang sebanding, mengingat manajemen

akuntan 5dan eksekuti8 keuangan5 tanggungja3ab utama untuk laporan keuangan dan laporan keuangan.

@erbedaan lain antara tiga kode etik adalah bah3a &A dan E standar di intin*a mengharuskan anggota untuk

melaporkan pelanggaran standar oleh anggota organisasi-organisasi mereka untuk pejabat *ang bertanggung ja3ab

dari organisasi. 9ode A@A tidak memiliki pers*aratan tersebut. su-isu kon8lik kepentingan dan tidak terhormat

tindakan dibahas lebih lanjut dalam bagian 8ol melenguh.

9on8lik 9epentingan 9on8lik hasil bunga ketika indi=idu meraup keuntungan pribadi *ang tidak pantas dari

tindakan mereka dalam kapasitas resmi. &isaln*a, seorang petugas akuntansi kepala mungkin memasak buku untuk

melebih-lebihkan pendapatan sebelum pajak dari korporasi majikan untuk mendapatkan bonus kinerja *ang lebih

besar. Atau, controller dari perusahaan milik publik mungkin terlibat dalam insider trading untuk memaksimalkan

keuntungan atau meminimalkan kerugian pembelian atau penjualan majikan e8ek poration cor. &isaln*a, Akuntansi

dan ilis @enegakan Auditing !diberlakukann*a' "$$ ! Desember CC', SE melaporkan pencabutan iin

praktek permanen dari praktekn*a dari controller, @A, sebuah perusahaan milik publik, *ang diduga terlibat dalam

insider trading dan dengan demikian menghindari kerugian lebih dari H ;". pada penjualan saham biasa majikan

compan* ini. &enurut SE, controller telah bertindak dengan pengelolaan senior perusahaan untuk melebih-

lebihkan laba perusahaan dengan lebih dari H "#.. selama dua-dan-satu-setengah tahun. ontroller

diperintahkan untuk mencurahkan H ;". dan memba*ar denda dalam jumlah *ang sama.

6ernoda 9isah 6ak satu pun dari tiga kode etik *ang disajikan dalam lampiran untuk bab ini mende8inisikan

tindakan tidak terhormat. &ungkin istilah tidak dapat dide8inisikan secara memadai atau dibatasi4 apa adalah tidak

terhormat

10 Ibd., ). 23. 11 Ba$an 21A dar Securte! *+chan$e Act o 13- 'enden!kan n!der tradn$ !eba$a "'e'bel

atau 'enual kea'anan !e'entara dala' ke)e'lkan 'ater, nor'a! non/)ublk. . . atau. . . 'en$ko'unka!kan

nor'a! ter!ebut !ehubun$an den$an tran!ak! eek.

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Bab 1 Etika Lanjutan Akuntansi 7

tindakan seorang pengamat mungkin tidak begitu dita8sirkan oleh orang lain. Sebagai contoh, mungkin anggota dari

&A, E, atau A@A mengamati pen*alahgunaan at lain anggota ini mena8sirkan bertindak sebagai ternoda

dengan anggota kasar, majikan anggota ini, organisasi, atau lainn*a en- titiesJ @ertan*aan semacam ini sulit dija3ab

dalam mas*arakat di mana beberapa memaa8kan tindakan pribadi *ang dikutuk oleh orang lain.

@enutup Dalam mempertimbangkan episode memasak buku, dijelaskan dalam bab-bab selanjutn*a, pembaca harusdiingat bah3a, meskipun 9omisi 6read3a* men*atakan,


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8 Bab 1 Etika Lanjutan Akuntansi

@ertan*aan *ang muncul dalam a*at di atas adalah sulit untuk dija3ab. Namun, SE telah menekankan

pentingn*a objekti=itas sebagai berikut, dalam menolak


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Bab 1 Etika di Akuntansi Lanjutan 9

adalah,< Akankah tindakan sa*a adil dan han*a untuk semua pihak *ang terkena dampakJ


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10 Chapter 1 Ethica !ssues in Ad"anced Acc#untin$

ecognie and communicate pro8essional limitations or other constraints that 3ould preclude responsible

judgment or success8ul per8ormance o8 an acti=it*.

ommunicate un8a=orable as 3ell as 8a=orable in8ormation and pro8essional judgments or opinions.

e8rain 8rom engaging in or supporting an* acti=it* that 3ould discredit the pro8ession.

+bjecti=it* &embers ha=e a responsibilit* to:

ommunicate in8ormation 8airl* and objecti=el*.

Disclose 8ull* all rele=ant in8ormation that could reasonabl* be e>pected to in8luence an intended user5s

understanding o8 the reports, comments, and recommendations presented.

RE"OLUTION O# ETHICAL CON#LICT

n appl*ing the standards o8 ethical conduct, members ma* encounter problems in identi- 8*ing unethical beha=ior or

in resol=ing an ethical con8lict. 0hen 8aced 3ith signi8icant ethical issues, members should 8ollo3 the established

policies o8 the organiation bearing on the resolution o8 such con8lict. 8 these policies do not resol=e the ethical

con8lict, such members should consider the 8ollo3ing courses o8 action.

Discuss such problems 3ith the immediate superior e>cept 3hen it appears that the superior is in=ol=ed, in 3hich

case the problem should be presented initiall* to the ne>t higher managerial le=el. 8 a satis8actor* resolution cannot

be achie=ed 3hen the problem is initiall* presented, submit the issues to the ne>t higher managerial le=el. 8 the

immediate superior is the chie8 e>ecuti=e o88icer, or eGui=alent, the acceptable re=ie3ing authorit* ma* be a group

such as the audit committee, e>ecuti=e committee, board o8 directors, board o8 trustees, or o3ners. ontact 3ith

le=els abo=e the immediate superior should be initiated onl* 3ith the superior5s kno3ledge, assuming the superior is

not in- =ol=ed. E>cept 3here legall* prescribed, communication o8 such problems to authorities or indi=iduals not

emplo*ed or engaged b* the organiation is not considered appropriate.

lari8* rele=ant ethical issues b* con8idential discussion 3ith an objecti=e ad=isor !eg, &A Ethics ounseling

Ser=ice' to obtain a better understanding o8 possible courses o8 action. onsult *our o3n attorne* as to legal

obligations and rights concerning the ethical con8lict.

8 the ethical con8lict still e>ists a8ter e>hausting all le=els o8 internal re=ie3, there ma* be no other recourse on

signi8icant matters than to resign 8rom the organiation and to submit an in8ormati=e memorandum to an appropriate

representati=e o8 the organiation. A8ter resignation, depending on the nature o8 the ethical con8lict, it ma* also be

appropriate to noti8* other parties.

>ro' In!ttute o 6ana$e'ent Accountant!, State'ent! on 6ana$e'ent Accountn$< Standard! o *thcal Conduct

or 6ana$e'ent Accountant!, State'ent o. 1C &10 Para$on 8r#e, 6ont#ale, J 0?%-, A)rl 1?(. 5e)rnted @th

)er'!!on.

Appendi> %

FEI Code of Ethics

E5s mission includes signi8icant e88orts to promote ethical conduct in the practice o8 8i- nancial management

throughout the 3orld. Senior 8inancial o88icers hold an important and ele=ated role in corporate go=ernance. 0hile

members o8 the management team, the* are

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Chapter 1 Ethica !ssues in Ad"anced Acc#untin$ 11

uniGuel* capable and empo3ered to ensure that all stakeholders5 interests are appropriatel* balanced, protected and

preser=ed. 6his ode pro=ides principles to 3hich members are e>pected to adhere and ad=ocate. 6he* embod*

rules regarding indi=idual and peer responsibilities, as 3ell as responsibilities to emplo*ers, the public, and other

stakeholders. iolations o8 E5s ode o8 Ethics ma* subject the member to censure, suspension or e>- pulsion under

procedural rules adopted b* E5s Board o8 Directors.All members o8 E 3ill:

. Act 3ith honest* and integrit*, a=oiding actual or apparent con8licts o8 interest in per-

sonal and pro8essional relationships. %. @ro=ide constituents 3ith in8ormation that is accurate, complete,

objecti=e, rele=ant,

timel* and understandable. ". ompl* 3ith applicable rules and regulations o8 8ederal, state, pro=incial, and local

go=ernments, and other appropriate pri=ate and public regulator* agencies. $. Act in good 8aith, responsibl*, 3ith

due care, competence and diligence, 3ithout mis- representing material 8acts or allo3ing one5s independent

judgment to be subordinated. 1. espect the con8identialit* o8 in8ormation acGuired in the course o8 one5s 3ork

e>cept 3hen authoried or other3ise legall* obligated to disclose. on8idential in8ormation acGuired in the course o8

one5s 3ork 3ill not be used 8or personal ad=antage. 2. Share kno3ledge and maintain skills important and rele=antto constituents5 needs. ;. @roacti=el* promote ethical beha=ior as a responsible partner among peers, in the 3ork

en=ironment and the communit*. #. Achie=e responsible use o8 and control o=er all assets and resources

emplo*ed or

entrusted. C. eport kno3n or suspected =iolations o8 this ode in accordance 3ith the E ules

o8 @rocedure. . Be accountable 8or adhering to this ode.

Source< >nancal *+ecut#e! Internatonal Code o *thc!

Appendi> "

AICPA Code of Professional Conduct*CO$PO"ITION% APPLICA&ILIT'% AND CO$PLIANCE

6he ode o8 @ro8essional onduct o8 the American nstitute o8 erti8ied @ublic Accoun- tants consists o8 t3o

sections!' the @rinciples and !%' the ules. 6he @rinciples pro=ide the 8rame3ork 8or the ules, 3hich go=ern the

per8ormance o8 pro8essional ser=ices b* members. 6he ouncil o8 the American nstitute o8 erti8ied @ublic

Accountants is authoried to designate bodies to promulgate technical standards under the ules, and the b*la3s

reGuire adherence to those ules and standards.

6he ode o8 @ro8essional onduct 3as adopted b* membership to pro=ide guidance and rules to all members

those in public practice, in industr*, in go=ernment, and in education in the per8ormance o8 their pro8essional

responsibilities.

; >ro' A'ercan In!ttute o Certed Publc Accountant!, Code o Proe!!onal Conduct. Co)7r$ht = 2000 b7A'ercan In!ttute o Certed Publc Accountant!, Inc. &e@ ork(. 5e)rnted @th )er'!!on. &ot ncluded are the

State'ent! on Standard! or Ta+ Ser#ce! ncor)orated n the Code n 2000.(

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ompliance 3ith the ode o8 @ro8essional onduct, as 3ith all standards in an open societ*, depends primaril*

on members5 understanding and =oluntar* actions, secondaril* on rein8orcement b* peers and public opinion, and

ultimatel* on disciplinar* proceedings, 3hen necessar*, against members 3ho 8ail to compl* 3ith the ules.

OTHER GUIDANCE

nterpretations o8 ules o8 onduct consist o8 interpretations 3hich ha=e been adopted, a8- ter e>posure to state

societies, state boards, practice units and other interested parties, b* the pro8essional ethics di=ision5s e>ecuti=e

committee to pro=ide guidelines as to the scope and application o8 the ules but are not intended to limit such scope

or application. A member 3ho departs 8rom such guidelines shall ha=e the burden o8 justi8*ing such departure in

an* disciplinar* hearing. nterpretations 3hich e>isted be8ore the adoption o8 the ode o8 @ro8essional onduct on

/anuar* %, C##, 3ill remain in e88ect until 8urther action is deemed necessar* b* the appropriate senior technical

committee.

Ethics ulings consist o8 8ormal rulings made b* the pro8essional ethics di=ision5s e>ecuti=e committee a8ter

e>posure to state societies, state boards, practice units and other interested parties. 6hese rulings summarie the

application o8 ules o8 onduct and nterpretations to a particular set o8 8actual circumstances. &embers 3ho

depart 8rom such rulings in similar circumstances 3ill be reGuested to justi8* such departures. Ethics ulings

3hich e>isted be8ore the adoption o8 the ode o8 @ro8essional onduct on /anuar* %, C##, 3ill remain in e88ect

until 8urther action is deemed necessar* b* the appropriate senior technical committee.

@ublication o8 an nterpretation or Ethics ruling in 6he /ournal o8 Accountanc* constitutes notice to members.

7ence, the e88ecti=e date o8 the pronouncement is the last da* o8 the month in 3hich the pronouncement is published

in 6he /ournal o8 Accountanc*. 6he pro8essional ethics di=ision 3ill take into consideration the time that 3ould ha=e

been reasonable 8or the member to compl* 3ith the pronouncement.

A member should also consult, i8 applicable, the ethical standards o8 his state @A societ*, state board o8

accountanc*, the Securities and E>change ommission, and an* other go=ernmental agenc* 3hich ma* regulate his

client5s business or use his report to e=aluate the client5s compliance 3ith applicable la3s and related regulations.

SE6+N : @N@LES @reamble &embership in the American nstitute o8 erti8ied @ublic Accountants is

=oluntar*. B* ac- cepting membership, a certi8ied public accountant assumes an obligation o8 sel8-discipline abo=eand be*ond the reGuirements o8 la3s and regulations.

6hese @rinciples o8 the ode o8 @ro8essional onduct o8 the American nstitute o8 er- ti8ied @ublic Accountants

e>press the pro8ession5s recognition o8 its responsibilities to the public, to clients, and to colleagues. 6he* guide

members in the per8ormance o8 their pro- 8essional responsibilities and e>press the basic tenets o8 ethical and

pro8essional conduct. 6he @rinciples call 8or an uns3er=ing commitment to honorable beha=ior, e=en at the sac-

ri8ice o8 personal ad=antage.

Article : esponsibilities n carr*ing out their responsibilities as pro8essionals, members should e>ercise sensiti=e

pro8essional and moral judgments in all their acti=ities. As pro8essionals, certi8ied public accountants per8orm an

essential role in societ*. onsis- tent 3ith that role, members o8 the American nstitute o8 erti8ied @ublic

Accountants ha=e responsibilities to all those 3ho use their pro8essional ser=ices. &embers also ha=e a

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continuing responsibilit* to cooperate 3ith each other to impro=e the art o8 accounting, maintain the public5s

con8idence, and carr* out the pro8ession5s special responsibilities 8or sel8-go=ernance. 6he collecti=e e88orts o8 all

members are reGuired to maintain and enhance the traditions o8 the pro8ession. Article : 6he @ublic nterest

&embers should accept the obligation to act in a 3a* that 3ill ser=e the public interest, honor the public trust, and

demonstrate commitment to pro8essionalism. A distinguishing mark o8 a pro8ession is acceptance o8 itsresponsibilit* to the public. 6he accounting pro8ession5s public consists o8 clients, credit grantors, go=ernments,

emplo*ers, in=estors, the business and 8inancial communit*, and others 3ho rel* on the objecti=it* and integrit* o8

certi8ied public accountants to maintain the orderl* 8unctioning o8 commerce. 6his reliance imposes a public interest

responsibilit* on certi8ied public accountants. 6he public interest is de8ined as the collecti=e 3ell-being o8 the

communit* o8 people and insti- tutions the pro8ession ser=es.

n discharging their pro8essional responsibilities, members ma* encounter con8licting pressures 8rom among each

o8 those groups. n resol=ing those con8licts, members should act 3ith integrit*, guided b* the precept that 3hen

members 8ul8ill their responsibilit* to the public, clients5 and emplo*ers5 interests are best ser=ed.

6hose 3ho rel* on certi8ied public accountants e>pect them to discharge their responsibilities 3ith integrit*,

objecti=it*, due pro8essional care, and a genuine interest in ser=ing the public. 6he* are e>pected to pro=ide Gualit*

ser=ices, enter into 8ee arrangements, and o88er a range o8 ser=icesall in a manner that demonstrates a le=el o8pro8essionalism consistent 3ith these @rinciples o8 the ode o8 @ro8essional onduct.

All 3ho accept membership in the American nstitute o8 erti8ied @ublic Accountants commit themsel=es to

honor the public trust. n return 8or the 8aith that the public reposes in them, members should seek continuall* to

demonstrate their dedication to pro8essional e>cellence. Article : ntegrit* 6o maintain and broaden public

con8idence, members should per8orm all pro8essional responsibilities 3ith the highest sense o8 integrit*. ntegrit* is

an element o8 character 8undamental to pro8essional recognition. t is the Gual- it* 8rom 3hich the public trust

deri=es and the benchmark against 3hich a member must ultimatel* test all decisions.

ntegrit* reGuires a member to be, among other things, honest and candid 3ithin the constraints o8 client

con8identialit*. Ser=ice and the public trust should not be subordinated to personal gain and ad=antage. ntegrit* can

accommodate the inad=ertent error and the honest di88erence o8 opinion4 it cannot accommodate deceit or

subordination o8 principle.

ntegrit* is measured in terms o8 3hat is right and just. n the absence o8 speci8ic rules, standards, or guidance, or

in the 8ace o8 con8licting opinions, a member should test decisions and deeds b* asking: OAm doing 3hat a

person o8 integrit* 3ould doJ 7a=e retained m* integrit*JP ntegrit* reGuires a member to obser=e both the 8orm

and the spirit o8 technical and ethical standards4 circum=ention o8 those standards constitutes subordination o8

judgment.

!nte$rit% as# re&uires a 'e'ber t# #bser"e the principes #( #bjecti"it% and indepen) dence and #( due care*

Artice !+, -bjecti"it% and !ndependence A 'e'ber sh#ud 'aintain #bjecti"it% and be (ree #( c#n(icts #( interest in

dischar$in$ pr#) (essi#na resp#nsibiities* A 'e'ber in pubic practice sh#ud be independent in (act and

appearance .hen pr#"idin$ auditin$ and #ther attestati#n ser"ices*

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+bjecti=it* is a state o8 mind, a Gualit* that lends =alue to a member5s ser=ices. t is a distinguishing 8eature o8 the

pro8ession. 6he principle o8 objecti=it* imposes the obligation to be impartial, intellectuall* honest, and 8ree o8

con8licts o8 interest. ndependence precludes relationships that ma* appear to impair a member5s objecti=it* in

rendering attestation ser=ices.

&embers o8ten ser=e multiple interests in man* di88erent capacities and must demonstrate their objecti=it* in=ar*ing circumstances. &embers in public practice render attest, ta>, and management ad=isor* ser=ices. +ther

members prepare 8inancial statements in the emplo*ment o8 others, per8orm internal auditing ser=ices, and ser=e in

8inancial and management capacities in industr*, education, and go=ernment. 6he* also educate and train those

3ho aspire to admission into the pro8ession. egardless o8 ser=ice or capacit*, members should protect the

integrit* o8 their 3ork, maintain objecti=it*, and a=oid an* subordination o8 their judgment.

or a member in public practice, the maintenance o8 objecti=it* and independence re- Guires a continuing

assessment o8 client relationships and public responsibilit*. Such a member 3ho pro=ides auditing and other

attestation ser=ices should be independent in 8act and appearance. n pro=iding all other ser=ices, a member should

maintain objecti=it* and a=oid con8licts o8 interest.

Although members not in public practice cannot maintain the appearance o8 independence, the* ne=ertheless

ha=e the responsibilit* to maintain objecti=it* in rendering pro- 8essional ser=ices. &embers emplo*ed b* others toprepare 8inancial statements or to per8orm auditing, ta>, or consulting ser=ices are charged 3ith the same

responsibilit* 8or objecti=it* as members in public practice and must be scrupulous in their application o8 generall*

accepted accounting principles and candid in all their dealings 3ith members in public practice.

Article : Due are A member should obser=e the pro8ession5s technical and ethical standards, stri=e continuall* to

impro=e competence and the Gualit* o8 ser=ices, and discharge pro8essional responsibilit* to the best o8 the

member5s abilit*. 6he Guest 8or e>cellence is the essence o8 due care. Due care reGuires a member to discharge

pro8essional responsibilities 3ith competence and diligence. t imposes the obligation to per8orm pro8essional

ser=ices to the best o8 a member5s abilit* 3ith concern 8or the best interest o8 those 8or 3hom the ser=ices are

per8ormed and consistent 3ith the pro8es- sion5s responsibilit* to the public.

ompetence is deri=ed 8rom a s*nthesis o8 education and e>perience. t begins 3ith a master* o8 the common

bod* o8 kno3ledge reGuired 8or designation as a certi8ied public accountant. 6he maintenance o8 competence

reGuires a commitment to learning and pro8essional impro=ement that must continue throughout a member5s

pro8essional li8e. t is a member5s indi=idual responsibilit*. n all engagements and in all responsibilities, each

member should undertake to achie=e a le=el o8 competence that 3ill assure that the Gualit* o8 the member5s ser=ices

meets the high le=el o8 pro8essionalism reGuired b* these @rinciples.

ompetence represents the attainment and maintenance o8 a le=el o8 understanding and kno3ledge that enables a

member to render ser=ices 3ith 8acilit* and acumen. t also establishes the limitations o8 a member5s capabilities b*

dictating that consultation or re8erral ma* be reGuired 3hen a pro8essional engagement e>ceeds the personal

competence o8 a member or a member5s 8irm. Each member is responsible 8or assessing his or her o3n competence

o8 e=aluating 3hether education, e>perience, and judgment are adeGuate 8or the responsibilit* to be assumed.

&embers should be diligent in discharging responsibilities to clients, emplo*ers, and the public. Diligence

imposes the responsibilit* to render ser=ices promptl* and care8ull*, to be thorough, and to obser=e applicable

technical and ethical standards.

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Due care reGuires a member to plan and super=ise adeGuatel* an* pro8essional acti=it* 8or 3hich he or she is

responsible. Article : Scope and Nature o8 Ser=ices A member in public practice should obser=e the @rinciples o8

the ode o8 @ro8essional onduct in determining the scope and nature o8 ser=ices to be pro=ided. 6he public interest

aspect o8 certi8ied public accountants5 ser=ices reGuires that such ser- =ices be consistent 3ith acceptable

pro8essional beha=ior 8or certi8ied public accountants. ntegrit* reGuires that ser=ice and the public trust not besubordinated to personal gain and ad=antage. +bjecti=it* and independence reGuires that members be 8ree 8rom

con8licts o8 interest in discharging pro8essional responsibilities. Due care reGuires that ser=ices be pro- =ided 3ith

competence and diligence.

Each o8 these @rinciples should be considered b* members in determining 3hether or not to pro=ide speci8ic

ser=ices in indi=idual circumstances. n some instances, the* ma* represent an o=erall constraint on the nonaudit

ser=ices that might be o88ered to a speci8ic client. No hard-and-8ast rules can be de=eloped to help members reach

these judgments, but the* must be satis8ied that the* are meeting the spirit o8 the @rinciples in this regard.

n order to accomplish this, members should

@ractice in 8irms that ha=e in place internal Gualit*-control procedures to ensure that ser- =ices are competentl*

deli=ered and adeGuatel* super=ised.

Determine, in their indi=idual judgments, 3hether the scope and nature o8 other ser=ices pro=ided to an audit client

3ould create a con8lict o8 interest in the per8ormance o8 the audit 8unction 8or that client.

Assess, in their indi=idual judgments, 3hether an acti=it* is consistent 3ith their role as pro8essionals. SE6+N

: FLES Applicabilit* 6he b*la3s o8 the American nstitute o8 erti8ied @ublic Accountants reGuire that members

adhere to the ules o8 the ode o8 @ro8essional onduct. &embers must be prepared to jus- ti8* departures 8rom

these ules. De8initions; (@ursuant to its authorit* under the b*la3s !BL Q ".2.%.%' to interpret the ode o8 @ro8es-

sional onduct, the @ro8essional Ethics E>ecuti=e ommittee has issued the 8ollo3ing de8initions o8 terms

appearing in the code e88ecti=e No=ember ", C#C.)

Attest engagement. An attest engagement is an engagement that reGuires independence as de8ined in A@A

@ro8essional Standards. Attest engagement team. 6he attest engagement team consists o8 indi=iduals partic- ipating

in the attest engagement, including those 3ho per8orm concurring and second partner re=ie3s. 6he attestengagement team includes all emplo*ees and contractors retained b* the 8irm 3ho participate in the attest

engagement, irrespecti=e o8 their 8unctional classi8ication !8or e>ample, audit, ta>, or management consulting

ser=ices'. 6he attest engagement team e>cludes specialists as discussed in SAS No. ;", Fsing the 0ork o8 a

Specialist (AF section ""2), and indi=iduals 3ho per8orm onl* routine clerical 8unctions, such as 3ord processing

and photocop*ing. lient. A client is an* person or entit*, other than the member5s emplo*er, that engages a member

or a member5s 8irm to per8orm pro8essional ser=ices or a person or entit*

1? A! ado)ted, Januar7 12, 199, unle!! other@!e ndcated

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3ith respect to 3hich pro8essional ser=ices are per8ormed. or purposes o8 this paragraph, the term Oemplo*erP does

not include

a. Entities engaged in the practice o8 public accounting4 or b. ederal, state, and local go=ernments or component

units thereo8 pro=ided the

member per8orming pro8essional ser=ices 3ith respect to those entities

i. s directl* elected b* =oters o8 the go=ernment or component unit thereo8

3ith respect to 3hich pro8essional ser=ices are per8ormed4 or ii. s an indi=idual 3ho is !' appointed b* a

legislati=e bod* and !%' subject to

remo=al b* a legislati=e bod*4 or iii. s appointed b* someone other than the legislati=e bod*, so long as the ap-

pointment is con8irmed b* the legislati=e bod* and remo=al is subject to o=ersight or appro=al b* the legislati=e

bod*. lose relati=e. A close relati=e is a parent, sibling, or nondependent child. ouncil. 6he ouncil o8 the

American nstitute o8 erti8ied @ublic Accountants. o=ered member. A co=ered member is

a. An indi=idual on the attest engagement team4 b. An indi=idual in a position to in8luence the attest engagement4 c.

A partner or manager 3ho pro=ides nonattest ser=ices to the attest client begin- ning once he or she pro=ides tenhours o8 nonattest ser=ices to the client 3ithin an* 8iscal *ear and ending on the later o8 the date !i' the 8irm signs the

report on the 8inancial statements 8or the 8iscal *ear during 3hich those ser=ices 3ere pro- =ided or !ii' he or she no

longer e>pects to pro=ide ten or more hours o8 nonattest ser=ices to the attest client on a recurring basis4 d. A

partner in the o88ice in 3hich the lead attest engagement partner primaril*

practices in connection 3ith the attest engagement4 e. 6he 8irm, including the 8irm5s emplo*ee bene8it plans4 or 8.

An entit* 3hose operating, 8inancial, or accounting policies can be controlled

!as de8ined b* generall* accepted accounting principles (AA@) 8or consolidation purposes' b* an* o8 the

indi=iduals or entities described in !a' through !e' or b* t3o or more such indi=iduals or entities i8 the* act together.

inancial institution. A 8inancial institution is considered to be an entit* that, as part o8 its normal business

operations, makes loans or e>tends credit to the general public. n addition, 8or automobile leases addressed under

interpretation -1, Loans rom inancial nstitution lients, an entit* 3ould be considered a 8inancial institutioni8 it leases automobiles to the general public. inancial statements. A presentation o8 8inancial data, including

accompan*ing notes, i8 an*, intended to communicate an entit*5s economic resources andMor obligations at a point

in time or the changes therein 8or a period o8 time, in accordance 3ith generall* accepted accounting principles or a

comprehensi=e basis o8 accounting other than generall* accepted accounting principles.

ncidental 8inancial data to support recommendations to a client or in documents 8or 3hich the reporting is

go=erned b* Statements on Standards 8or Attestation Engagements and ta> returns and supporting schedules do not,

8or this purpose, consti- tute 8inancial statements. 6he statement, a88ida=it, or signature o8 preparers reGuired on ta>

returns neither constitutes an opinion on 8inancial statements nor reGuires a dis- claimer o8 such opinion. irm. A

8irm is a 8orm o8 organiation permitted b* la3 or regulation 3hose characteristics con8orm to resolutions o8 the

ouncil o8 the American nstitute o8 erti8ied @ublic Accountants that is engaged in the practice o8 public

accounting. E>cept 8or purposes

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o8 appl*ing ule : ndependence, the 8irm includes the indi=idual partners thereo8. (e=ised No=ember, %.)

nstitute. 6he American nstitute o8 erti8ied @ublic Accountants. nterpretations o8 rules o8 conduct.

@ronouncements issued b* the di=ision o8 pro- 8essional ethics to pro=ide guidelines concerning the scope and

application o8 the rules o8 conduct. &ember. A member, associate member, or international associate o8 the

American nstitute o8 erti8ied @ublic Accountants. @ractice o8 public accounting. 6he practice o8 public accountingconsists o8 the per8or- mance 8or a client, b* a member or a member5s 8irm, 3hile holding out as @A!s', o8 the

pro8essional ser=ices o8 accounting, ta>, personal 8inancial planning, litigation support ser- =ices, and those

pro8essional ser=ices 8or 3hich standards are promulgated b* bodies designated b* ouncil, such as Statements o8

inancial Accounting Standards, Statements on Auditing Standards, Statements on Standards 8or Accounting and

e=ie3 Ser=ices, State- ments on Standards 8or onsulting Ser=ices, Statements o8 o=ernmental Accounting

Standards, and Statements on Standards 8or Attestation Engagements.

7o3e=er, a member or a member5s 8irm, 3hile holding out as @A!s', is not considered to be in the practice o8

public accounting i8 the member or the member5s 8irm does not per- 8orm, 8or an* client, an* o8 the pro8essional

ser=ices described in the preceding paragraph. @ro8essional Ser=ices. @ro8essional ser=ices include all ser=ices

per8ormed b* a member 3hile holding out as a @A. FLES ule ndependence A member in public practice

shall be independent in the per8ormance o8 pro8essional ser- =ices as reGuired b* standards promulgated b* bodies

designated b* ouncil. ule % ntegrit* and +bjecti=it* n the per8ormance o8 an* pro8essional ser=ice, a member

shall maintain objecti=it* and integrit*, shall be 8ree o8 con8licts o8 interest, and shall not kno3ingl* misrepresent

8acts or subordinate his or her judgment to others. ule % eneral Standards A member shall compl* 3ith the

8ollo3ing standards and an* interpretations thereo8 b* bodies designated b* ouncil.

A. @ro8essional ompetence. Fndertake onl* those pro8essional ser=ices that the member or the member5s 8irm can

reasonabl* e>pect to be completed 3ith pro8es- sional competence. B. Due @ro8essional are. E>ercise due

pro8essional care in the per8ormance o8 pro-

8essional ser=ices. . @lanning and Super=ision. AdeGuatel* plan and super=ise the per8ormance o8 pro-

8essional ser=ices. D. Su88icient ele=ant Data. +btain su88icient rele=ant data to a88ord a reasonable basis 8or

conclusions or recommendations in relation to an* pro8essional ser=ices per8ormed. ule %% ompliance 3ith

Standards A member 3ho per8orms auditing, re=ie3, compilation, management consulting, ta>, or other pro8essionalser=ices shall compl* 3ith standards promulgated b* bodies designated b* ouncil.

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ule %" Accounting @rinciples A member shall not !' e>press an opinion or state a88irmati=el* that the 8inancial

statements or other 8inancial data o8 an* entit* are presented in con8ormit* 3ith generall* accepted accounting

principles or !%' state that he or she is not a3are o8 an* material mod- i8ications that should be made to such

statements or data in order 8or them to be in con8or- mit* 3ith generall* accepted accounting principles, i8 such

statements or data contain an* departure 8rom an accounting principle promulgated b* bodies designated b* ouncilto establish such principles that has a material e88ect on the statements or data taken as a 3hole. 8, ho3e=er, the

statements or data contain such a departure and the member can demonstrate that due to unusual circumstances the

8inancial statements or data 3ould other3ise ha=e been misleading, the member can compl* 3ith the rule b*

describing the departure, its appro>imate e88ects, i8 practicable, and the reasons 3h* compliance 3ith the principle

3ould result in a misleading statement. ule " on8idential lient n8ormation A member in public practice shall

not disclose an* con8idential client in8ormation 3ithout the speci8ic consent o8 the client.

6his rule shall not be construed !' to relie=e a member o8 his or her pro8essional obligations under rules %%

and %", !%' to a88ect in an* 3a* the member5s obligation to compl* 3ith a =alidl* issued and en8orceable subpoena

or summons, or to prohibit a member5s compliance 3ith applicable la3s and go=ernment regulations, !"' to

prohibit re=ie3 o8 a mem- ber5s pro8essional practice under A@A or state @A societ* or Board o8 Accountanc*

authoriation, or !$' to preclude a member 8rom initiating a complaint 3ith, or responding to an* inGuir* made b*,

the ethics di=ision or trial board o8 the nstitute or a dul* constituted in=estigati=e or disciplinar* bod* o8 a state

@A societ* or Board o8 Accountanc*.

&embers o8 an* o8 the bodies identi8ied in !$' abo=e and members in=ol=ed 3ith pro- 8essional practice re=ie3s

identi8ied in !"' abo=e shall not use to their o3n ad=antage or disclose an* member5s con8idential client

in8ormation that comes to their attention in carr*ing out those acti=ities. 6his prohibition shall not restrict members5

e>change o8 in8ormation in connection 3ith the in=estigati=e or disciplinar* proceedings described in !$' abo=e or

the pro8essional practice re=ie3s described in !"' abo=e. ule "% ontingent ees# A member in public practice

shall not

. @er8orm 8or a contingent 8ee an* pro8essional ser=ices 8or, or recei=e such a 8ee 8rom, a

client 8or 3hom the member or the member5s 8irm per8orms a. an audit or re=ie3 o8 a 8inancial statement4 or b. a

compilation o8 a 8inancial statement 3hen the member e>pects, or reasonabl* might e>pect, that a third part* 3illuse the 8inancial statement and the member5s compilation report does not disclose a lack o8 independence4 or c. an

e>amination o8 prospecti=e 8inancial in8ormation4

or %. @repare an original or amended ta> return or claim 8or a ta> re8und 8or a contingent 8ee

8or an* client.

6he prohibition in !' abo=e applies during the period in 3hich the member or the mem- ber5s 8irm is engaged to

per8orm an* o8 the ser=ices listed abo=e and the period co=ered b* an* historical 8inancial statements in=ol=ed in

an* such listed ser=ices.

19 a@! or board o accountanc7 rule! o !o'e !tate! )rohbt the rece)t o contn$ent ee! b7 CPA!. &Author! note(

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E>cept as stated in the ne>t sentence, a contingent 8ee is a 8ee established 8or the per- 8ormance o8 an* ser=ice

pursuant to an arrangement in 3hich no 8ee 3ill be charged unless a speci8ied 8inding or result is attained, or in

3hich the amount o8 the 8ee is other3ise de- pendent upon the 8inding or result o8 such ser=ice. Solel* 8or purposes

o8 this rule, 8ees are not regarded as being contingent i8 8i>ed b* courts or other public authorities, or, in ta> mat-

ters, i8 determined based on the results o8 judicial proceedings or the 8indings o8 go=ernmental agencies.A member5s 8ees ma* =ar* depending, 8or e>ample, on the comple>it* o8 ser=ices rendered. ule $ (eser=ed)

ule 1 Acts Discreditable A member shall not commit an act discreditable to the pro8ession. ule 1% Ad=ertising

and +ther orms o8 Solicitation A member in public practice shall not seek to obtain clients b* ad=ertising or other

8orms o8 solicitation in a manner that is 8alse, misleading, or decepti=e. Solicitation b* the use o8 coercion, o=er-

reaching, or harassing conduct is prohibited. ule 1" ommissions and e8erral eesC A. @rohibited

ommissions A member in public practice shall not 8or a commission recommend or re8er to a client an* product or

ser=ice, or 8or a commission recommend or re8er an* product or ser=ice to be supplied b* a client, or recei=e a

commission, 3hen the member or the member5s 8irm also per8orms 8or that client

a. an audit or re=ie3 o8 a 8inancial statement4 or b. a compilation o8 a 8inancial statement 3hen the member e>pects,

or reasonabl* might e>pect, that a third part* 3ill use the 8inancial statement and the member5s compilation report

does not disclose a lack o8 independence4 or c. an e>amination o8 prospecti=e 8inancial in8ormation.6his prohibition applies during the period in 3hich the member is engaged to per8orm an* o8 the ser=ices listed

abo=e and the period co=ered b* an* historical 8inancial statements in=ol=ed in such listed ser=ices.

B. Disclosure o8 @ermitted ommissions A member in public practice 3ho is not prohibited b* this rule 8rom

per8orming ser=ices 8or or recei=ing a commission and 3ho is paid or e>pects to be paid a commission shall disclose

that 8act to an* person or entit* to 3hom the member recommends or re8ers a product or ser=ice to 3hich the

commission relates.

. e8erral ees An* member 3ho accepts a re8erral 8ee 8or recommending or re8erring an* ser=ice o8 a @A to an*

person or entit* or 3ho pa*s a re8erral 8ee to obtain a client shall disclose such acceptance or pa*ment to the client.

ule 1$ (6here is currentl* no rule 1$.)

1 a@! or board o accountanc7 rule! o !o'e !tate! )rohbt the )a7'ent or rece)t o co''!!on! b7 CPA!.&Author! note(

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ule 11 orm o8 +rganiation and Name A member ma* practice public accounting onl* in the 8orm o8

organiation permitted b* la3 or regulation 3hose characteristics con8orm to resolutions o8 ouncil.

A member shall not practice public accounting under a 8irm name that is misleading. Names o8 one or more past

o3ners ma* be included in the 8irm name o8 a successor organiation.

A 8irm ma* not designate itsel8 as O&embers o8 the American nstitute o8 erti8ied @ublic AccountantsP unless

all o8 its o3ners are members o8 the nstitute.

Revie

1. What are cute accounting and cooking the books? Questions

%. 0h* is the EGuit* unding orporation o8 America 8raud signi8icant 8or management

accountants and 8inancial e>ecuti=esJ ". denti8* the 8our components o8 ethical conduct 8or management

accountants, set 8orth in Standards o8 Ethical onduct 8or &embers o8 the nstitute o8 &anagement Accountants. $.

7o3 did the National ommission on raudulent inancial eporting !6read3a*

ommission' de8ine 8raudulent 8inancial reportingJ 1. 0hat ules o8 @ro8essional onduct o8 the American

nstitute o8 erti8ied @ublic Accountants appl* to all members o8 the A@A, including management accountantsJ 2.Do the ethics codes o8 the nstitute o8 &anagement Accountants and the inancial E>ecuti=es nternational reGuire

their members to compl* 3ith generall* accepted accounting principlesJ E>plain. ;. 0hat is insider trading o8

corporate securitiesJ #. Does the Securities and E>change ommission accept a Ogood soldierP rationaliation

8or 8raudulent 8inancial reportingJ E>plain. C. 0hat are the obligations o8 management accountants regarding

con8licts o8 interestJ . Does the ode o8 Ethics o8 the inancial E>ecuti=es nternational reGuire E members to

maintain the con8identialit* o8 in8ormation acGuired in the course o8 their 3ork in all circumstancesJ E>plain. .

Does the ode o8 @ro8essional onduct o8 the American nstitute o8 erti8ied @ublic Accountants reGuire A@A

members in industr* to maintain the appearance o8 inde- pendenceJ E>plain. %. 0hat classes o8 accountants are

subject to regulation b* the @ublic ompan* Account-

ing +=ersight BoardJ

E!ercises

(E)er*+se 1,1-

Select the best ans3er 8or each o8 the 8ollo3ing multiple-choice Guestions:

. 6he b*la3s o8 the A@A reGuire members to adhere to the ode o8 @ro8essional on-

duct section entitled: a. @rinciples b. ules c. nterpretations d. Ethics ulings

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%. A rule o8 the A@A ode o8 @ro8essional onduct that does not appl* to A@A

members in pri=ate industr* is: a. ule ndependence. b. ule % ntegrit* and +bjecti=it*. c. ule % eneral

Standards. d. ule %" Accounting @rinciples. e. None o8 the 8oregoing. ". onduct o8 a member5s personal a88airs is

addressed in the ethics code or codes o8:

a. 6he American nstitute o8 erti8ied @ublic Accountants onl*. b. 6he inancial E>ecuti=es nternational. c. 6he

nstitute o8 &anagement Accountants onl*. d. None o8 the three organiations cited abo=e. $. According to the

National ommission on raudulent inancial eporting !6read3a* ommission', the responsibilit* 8or reliable

8inancial reporting lies 8irst and 8oremost: a. At the corporate le=el. b. 0ith the SE. c. 0ith independent auditors. d.

0ith state boards o8 accountanc*. 1. Does 8raudulent 8inancial reporting include:

Cook+n t.e &ooks? Cute A**ount+n? "ebua., No 'es b, No No *, 'es 'es !, 'es No

2. According to the A@A, are 8inancial statements o8 a business enterprise that ha=e been dra8ted b* the

enterprise5s independent auditors on its behal8 the representations o8 the enterprise5s:

$anaement? In!epen!ent Au!+tors? "ebua., 'es 'es b, 'es No *, No 'es !, No No

7. tandards of !thical "onduct for #embers of the $nstitute of #anagement %ccoun&

tants deal 3ith all o8 the 8ollo3ing e>cept: a. ompetence b. on8identialit* c. ndependence d. ntegrit* e.

+bjecti=it* #. 6he eport o8 the National ommission on raudulent inancial eporting did not

include recommendations 8or: a. inancial institution regulators. b. Legal counsel o8 business enterprises. c.

Educators. d. State boards o8 accountanc*.

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C. Are con8licts o8 interest addressed directl* in the ethics codes o8 the:

I6A >*I AICPA Sebuah. e! e! e! b. e! o e! c. o e! e! d. o o e!

. ompliance 3ith generall* accepted accounting principles is reGuired b* the ethics

code o8 the: a. A@A onl*. b. A@A and E. c. A@A and &A. d. A@A, E, and &A. . According toStandards o8 Ethical onduct 8or &embers o8 the nstitute o8 &anagement Accountants, management accountants

8aced 3ith signi8icant ethical issues should 8irst: a. Discuss the issue 3ith the immediate superior, e>cept 3hen it

appears the superior

is in=ol=ed. b. lari8* rele=ant concepts b* con8idential discussion 3ith an objecti=e ad=iser. c. Discuss the issue

3ith the audit committee o8 the board o8 directors. d. ollo3 the established policies o8 the business enterprise

bearing on the resolution

o8 such issues. %. 6he section o8 the American nstitute o8 erti8ied @ublic Accountants ode o8 @ro8es-

sional onduct that go=erns the per8ormance o8 pro8essional ser=ices b* A@A members is the: a. @rinciples b.

ules c. B*la3s d. 6echnical standards

Cases

(Case 1,1-

Suppose *ou 3ere to participate in a debate o8 the 8ollo3ing resolution: esol=ed, that the 8ollo3ing sentence 8rom

the @reamble to Section : @rinciples o8 the A@A ode o8 @ro8essional onduct is o=erl* idealistic in toda*5s

societ*:

6he @rinciples call 8or an uns3er=ing commitment to honorable beha=ior, e=en at the sacri8ice o8 personal ad=antage.

nstructions 0ould *ou support the a88irmati=e or the negati=e side o8 the debateJ E>plain.

(Case 1,/-

n his &editations, the oman emperor &arcus Aurelius Antoninus 3rote as 8ollo3s !Books and ':

A man must stand erect, not be kept erect b* others. . . . Be thou erect or be made erect.

nstructions E=aluate the use8ulness o8 the ethics rules o8 the A@A, E, and &A in relation to the 8oregoing

Guotations.

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23/25

(Case 1,0-

(Case 1,-

(Case 1,2-

(Case 1,3-

(Case 1,4-

(Case 1,5-

(Case 1,6-


hie8 e>ecuti=e o88icers !E+s' o8 business enterprises o8ten pressure enterprise chie8 8inancial o88icers !+s' or

controllers to cook the books.

nstructions E=aluate the ethics rules o8 the &A, E, and A@A as guidelines 8or resisting the pressures

described abo=e.

eneral nstruction D!%'!a' o8 orm -9, Annual eport, reGuires the report, 8iled 3ith the SE, to be signed b*

the registrant compan*5s principal 8inancial o88icer and controller or principal accounting o88icer. Similarl*, eneral

nstruction o8 orm -R, Ruarterl* eport, reGuires the report, 8iled 3ith the SE, to be signed b* the principal

8inancial or chie8 accounting o88icer o8 the registrant compan*.

nstructions 7o3 should the chie8 8inancial o88icer !+' and the controller o8 an SE registrant enterprise =ie3

the obligation to sign the registrant5s orm -9 and orm -R reports to the SEJ E>plain.

According to alph E. 0alters !page ; o8 the te>t': OAn obligation to be impartial seems to me to place a ne3 and

possibl* unrealistic burden on the management accountant.P

nstructions Do *ou agree 3ith 0altersJ E>plain.

An earlier =ersion o8 the inancial E>ecuti=es nternational ode o8 Ethics reGuired E members to conduct their

personal a88airs, as 3ell as their business a88airs, 3ith honest* and integrit*. 6he current =ersion does not ha=e that

reGuirement.

nstructions Did the E err in remo=ing the 8oregoing reGuirement 8rom its ethics codeJ E>plain.

ernon ass, chie8 8inancial o88icer o8 6ingle* orporation, a publicl* o3ned enterprise, asked his subordinate, /ohn

onro*, @A and controller o8 6ingle*, i8 an* accounting changes might be made be8ore the 8orthcoming close o8

the 8iscal *ear to enhance 6ingle*5s earnings 8or the *ear. onro* suggested that he might e>tend economic li=es o8

plant assets, reduce the percentage used to estimate doubt8ul accounts e>pense based on net credit sales, and de8er,

rather than e>pense, certain ad=ertising costs that consistentl* had been recog- nied as e>penses in prior *ears. ass

instructed onro* to 8ormalie a proposal incorpo- rating those suggestions, 8or consideration b* the audit

committee o8 6ingle*5s board o8 directors.

nstructions E=aluate the actions o8 ernon ass and /ohn onro*. !Suggestion: onsider the pro=isions o8 A@B

+pinion No. %, OAccounting hanges,P and Statement on Auditing Standards No. 1;, OAuditing Accounting

Estimates,P in *our discussion.'

6he 8ollo3ing e>cerpt is 8rom Standards o8 Ethical onduct 8or &embers o8 the nstitute o8 &anagement

Accountants:

8 (an) ethical con8lict still e>ists a8ter e>hausting all le=els o8 internal re=ie3, there ma* be no other recourse on signi8icant

matters than to resign 8rom the organiation and to submit an in8or- mati=e memorandum to an appropriate representati=e o8 the

organiation.

nstructions 0hat is *our opinion o8 the 8oregoing e>cerptJ E>plain.


24/25

erti8ied public accountants !@As' t*picall* are subject to codes o8 ethics or conduct en- acted b* state boards o8

accountanc* that license the accountants.

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nstructions i=en that @As are subject to o=ersight b* state boards o8 accountanc*, 3hat is the incenti=ei8 an*

8or @As in management accounting to be members o8 the A@A, the E, or the &AJ E>plain.

(Case 1,17-

Iou are the chie8 8inancial o88icer o8 @la*things, nc., a ne3l* organied, publicl* o3ned manu8acturer o8 to*s and

games. o* 0eber, the chairman o8 the audit committee o8 the compan*5s board o8 directors, asks *ou to consider at

3hat point, under generall* accepted accounting principles, the compan* can recognie re=enue 8or Obill and holdP

sales o8 to*s to retailers. 7e stresses that it is imperati=e 8or the compan* to compl* 3ith 8ederal and state securities

la3s.

nstructions @repare a memorandum to ans3er the audit committee chairman a8ter *ou ha=e researched the

8ollo3ing:

Statement o8 inancial Accounting oncepts No. 2, OElements o8 inancial Statements,P pars. ;#, ;C. Statement o8

inancial Accounting oncepts No. 1, Oecognition and &easurement in inancial Statements o8 Business

Enterprises,P pars. #", #$. Fni8orm ommercial ode, secs. $, 1. SE Accounting Series elease No. %C%,

O . . . n the &atter o8 Arthur Andersen o.P SE Accounting and Auditing En8orcement elease No. #, O . . . n

the &atter o8 Ste3art @arness.P SE Accounting and Auditing En8orcement elease No. #;, O . . . n the &atter o8

*press Bioscience nc. . . .P

(Case 1,11-

n a September CC# speech, 8ormer Securities and E>change ommission hairman Arthur Le=itt used the term

cookie-jar reser=es to describe a Ocooking the booksP tech- niGue used b* some publicl* o3ned companies to

manage earnings. 6he techniGue in=ol=ed establishing 8ictitious liabilities 8or bogus e>penses or realied and earned

re=enues in a highl* pro8itiable Guarter or 8iscal *ear, and re=ersing the liabilities in subseGuent lo3 earnings

periods.

nstructions a. +btain and stud* SE AAE $, On the &atter o8 0 race o., espondentP

!/une ", CCC' and describe the Ocookie-jar reser=esP techniGue used b* race. b. e=ie3 the Sta88 Accounting

Bulletins issued b* the SE subseGuent to /une ", CCC, and brie8l* describe the pro=isions o8 a Bulletin dealing

3ith the race matter and the SE sta885s resultant reGuirements.

EQA

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