Code of Professional Ethics and Conduct - Assignment Example

OF PROFESSIONAL ETHICS AND CONDUCT Rule 102 – Integrity and Objectivity For instances occurring when he was Chief Financial Officer (CFO) of Chancellor Corporation, David Volpe from Stoughton, MA was charged with violating Rule 102 of AICPA’s Codes of Professional Conduct, subsequent to his being also charged with illegal activities by the US Securities and Exchange Commission. Rule 102 states that a member “shall not knowingly misrepresent facts”. To wit, in order to make Chancellor’s financial situation seem better than it was, Volpe and other high ranking company officials made false statements to outside auditors.

Indeed Chancellor was near insolvency and is now defunct. In addition to settling with the SEC (as cited in SEC 2005), Volpe was expelled from the AICPA. It is a fair statement to say he was a very fortunate man, considering Andrew Fastow, his counterpart from the now infamous Enron, received six years in Federal prison for doing basically the same thing as Volpe, at roughly the same time (as cited in Saporito 2002). Permanently losing your professional license is of course probably a career ender but Fastow no doubt lost his license as well. Fair? It was to Volpe, for sure.

Trying to make a business appear to be better off than it actually is has been in practice as long as money has been involved in transactions, and will continue to happen. The only real way to prevent that sort of illegal activity is to make the penalties harsh, which they are. To set an example of someone is not something people like to think about but judging people like Volpe and Fastow harshly is the only way to curb “cooking the books”. Rule 201 – Professional Competence During the summer of 2010 Mr.

David Beck of Lexington Kentucky was the subject of an investigation by the AICPA and the Kentucky Society of CPA’s. That July Mr. Beck was not necessarily found “guilty” but entered into a concurrence with the two organizations over the outcome of an audit Beck had done on a business. Among the Codes of Professional Conduct he was charged with, one was Rule 201. The rule as when dealing with Beck was one of professional competence, in that he should not have engaged in the services knowing that he did not possess the expertise to complete the work.

Although the details are vague it is obvious that this is a very serious charge, dealing with the accountant’s very abilities. Dealing with Rule 201, along with being suspended from both professional organizations for two years, Beck agreed to undergo forty hours of specialized education courses as related to the Generally Accepted Accounting Principles (GAAP). Additionally he had to complete the AICPA’s self study ethics course (eight hours), of which he had to score at least 90%. Given that it was quite evident that Beck did not possess the proper training to properly do the job, making the man go through the proper schooling before he was allowed to operate as a CPA once more seems more than reasonable.

Although he didn’t admit responsibility, the requirement for ethics education also is a worthwhile disciplinary measure, as it was evident that he would have probably been found guilty. In reading several cases where Rule 201 has been violated, the only real way for the AICPA to prevent its recurrence would be to ensure that the licensing tests and standards are more stringent, so that only the most competent individuals possess the organization’s license in the first place. Rule 202 – Compliance with Standards After a review by the AICPA and the Illinois CPA Society, in August 2010, Harry G.

Doyle, Jr. of Waukegan, Illinois was allowed to agree to stipulations of violating several of the associations’ rules, one of which was Rule 202. The rule’s intent is to ensure certain professional standards are put into practice. During fiscal year 2007, Doyle allowed a financial statement report to be published and failed to recall and reissue the report, even after it was brought to his attention that it contained several factual errors. Not only that, he was evidently aware a person not a CPA had published the report.

Neither instance was in compliance with the ethical standards of Rule 202. Along with refresher training, Doyle’s license was suspended for six months. Moreover, because the audit report was for a government entity, he was further barred from executing audits for any government. He was also required to hire an independent disinterested firm to conduct a review of any new government audit, once he was permitted to do them again. Six months seems like a small price to pay for his knowingly let a false audit report, although granted that could signal the death knell for a business.

Also, if the government was the bulk of Doyle’s business before, that would indeed be a crushing blow. But audits can mean others’ careers are on the line as well, so if anything Doyle got off very lightly. There is no real way for the AICPA could actually prevent a knowing breach of standards from happening. The majority of any segment of society will comply with any rules of operation, while there are those who will take shortcuts when they can. RULE 501 – ACTS DISCREDIBLE The Minnesota Society of CPA’s, along with the AICPA, charged Joann Marie Eischens of Ham Lake in July 2009 (as cited in Minnesota 2010) with being in violation of Rule 501, Acts Discredible.

Specifically it was Interpretation 501-5, Failure to Follow Requirements of Governmental Bodies, Commissions, or Other Regulatory Agencies, in that while she performed an audit of an employee benefit plan, the part of the audit titled “Assets Held for Investment” violated the DOL regulation 29 CFR2520.103-10, which requires the rate of interest be included. As regarding Rule 501, Eischens was ordered to undertake many hours of retraining, including eighteen hours specific to employee benefit plans, of which six were to encompass SAS 70 reports.

Her membership was also suspended in the state society along with the AICPA for one year. Considering that the only violation to Rule 501 was leaving a figure off a form, especially inadvertently, would seem to be a bit severe at first glance. Yet there is much public scrutiny in the way business firms conduct the operation of their benefit plans, so the mere appearance of impropriety would ensure that all parts of the plan should be correct at every level. The AICPA did the only thing it could do in this instance, in particular by ordering her retraining in the matter of reports.

Periodic training for everybody licensed by them would probably be the best thing to minimize the occurrence of this in the future, with the stipulation that the member has to maintain a certain percentile. REFERENCES PowerPoint Lecture from Jacksonville State University (NA) Chapter 4 Professional Ethics (http://www.jsu.edu/) Retrieved From http://docs.google.com/viewer?a=v&q=cache:n1acCn7ydbwJ:ccba.jsu.edu/ccba/faculty/facultyFiles/jzanzig_Auditing%2520Ch%25204%2520Lecture.ppt+rule+102+aicpa+ppt&hl=en&gl=us&pid=bl&srcid=ADGEESjv3FIEmKl8H0E8j2WSPNIb5z4icc4y0KTOT-E3ijVYrt62q3gI1awHYPjZ-v3xBFMTCW05Y1gaYAgwxEfVmvGpHRjHqQ7gRG23CszmGjQzyXDiVmvGclcLiXXtiOTXwilLKQ4a&sig=AHIEtbTD8IxFubZfu-a64lVeJbP3cJP3GA American Institute of CPAs (2005-11) Disciplinary Actions Retrieved From http://www.aicpa.org/ForThePublic/DisciplinaryActions/Pages/default.aspx U.S.

SECURITIES AND EXCHANGE COMMISSION (2005) SEC Settles Civil Action with Former Massachusetts Company's President, Outside Director and Auditors Retrieved From http://www.sec.gov/litigation/litreleases/lr19177.htm Saporito, Bill, (2002), How Fastow Helped Enron Fall Retrieved From http://www.time.com/time/business/article/0%2C8599%2C201871%2C00.html State of Minnesota Board of Accountancy (2010) In the Matter of Joan Marie Eischens Certificate No. 09801 Retrieved From http://www.boa.state.mn.us/Licensing/Data/Sites/1/Docs/Enforcement/Orders/2010_11_19/Eischens.pdf