MODERN

MODERN AUDITING
AUDITING
7th
7th Edition
Edition
William C. Boynton
California Polytechnic State
University at San Luis Obispo

Raymond N. Johnson
Portland State University

Walter G. Kell
Developed by: University of Michigan
Gregory K. Lowry, MBA,
CPA John Wiley & Sons, Inc.
Saint Paul’s College
 CHAPTER
CHAPTER 33
PROFESSIONAL
PROFESSIONAL ETHICS
ETHICS
 Ethics and Morality
 AICPA Code of Professional Conduct
 Rules of Conduct
 Rule 101 — Independence
 Rule 102 — Integrity and Objectivity
 Rule 201 — General Standards
 Rule 202 — Compliance with Standards
 Rule 203 — Accounting Principles
 Rule 301 — Confidential Client
Information
 CHAPTER
CHAPTER 33
PROFESSIONAL
PROFESSIONAL ETHICS
ETHICS

 Rule 302 — Contingent Fees

 Rule 501 — Acts Discreditable
 Rule 502 — Advertising and Other
Forms of Solicitation
 Rule 503 — Commissions and Referral
Fees
 Rule 505 — Form of Organization and
Name
 Enforcement of the Rules
 Ethics
Ethics and
and Morality
Morality
General Ethics attempts to deal with
ethical questions by defining what is good
for the individual and society, and by trying
to establish the nature of obligations or
duties that individuals owe themselves and
each other.
Professional Ethics must extend beyond
moral principles. They include standards of
behavior for a professional person that are
designed for both practical and idealistic
purposes.
 AICPA
AICPA Code
Code of
of
Professional
Professional Conduct
Conduct
AICPA Professional Ethics Team
1. Standard Setting
2. Ethics Enforcement
3. Technical Inquiry Services
Code
Code Sections
Sections and
and Related
Related
Pronouncements
Pronouncements
Figure
Figure 3-1
3-1
 Code
Code Definitions
Definitions
Client Any person or entity, other than the
member’s employer, that engages a member
or a member’s firm to perform professional
services or a person or entity with respect
to which professional services are
performed.
Council The Council of the AICPA.
Enterprise Synonymous with the term
“client.”
 Code
Code Definitions
Definitions
Firm A form of organization permitted by
state law or regulation whose
characteristics conform to resolutions of
Council that is engaged in the practice of
public accounting, including the individual
owners thereof.
Holding out Any action initiated by a
member that informs others of his or her
status as a CPA or AICPA accredited
specialist.
Institute The AICPA.
 Code
Code Definitions
Definitions
Member A member, associate member, or
international associate of the AICPA.
Practice of public accounting Performance
for a client, by a member or a member’s firm,
while holding out as CPA(s), of the
professional services of accounting, tax,
personal financial planning, litigation
support services, and those professional
services for which standards are promulgated
by bodies designated by Council.
Professional Services All services performed
by a CPA while holding out as a CPA.
 Principles
Principles
In the Code, the 6 principles are identified as
follows:
1. Responsibilities
2. The Public Interest
3. Integrity
4. Objectivity and Independence
5. Due Care
6. Scope and Nature of Services
 Rules
Rules of
of Conduct
Conduct
Figure
Figure 3-2
3-2
Applicability
All Members in
Section/Rule Members Public Practice

Section 100 Independence, Integrity, and

Objectivity
101 Independence 
102 Integrity and Objectivity 

Section 200 General Standards and Accounting

Principles
201 General Standards 
202 Compliance with Standards 
203 Accounting Principles 
 Rules
Rules of
of Conduct
Conduct
Figure
Figure 3-2
3-2
Applicability
All Members in
Section/Rule Members Public Practice

Section 300 Responsibilities to Clients

301 Confidential Client Information 
302 Contingent Fees 

Section 400 Responsibilities to Colleagues

(No currently effective rules in this
section.)

Section 500 Other Responsibilities and Practices

501 Acts Discreditable 
502 Advertising and Other Forms of
Solicitation 
503 Commissions and Referral Fees 
504 Form of Organization and Name 
 Enforcement
Enforcement of
of the
the Rules
Rules

1. Joint Ethics Enforcement

Procedures
2. Joint Trial Board Procedures
a. Admonish the member.
b. Suspend the member for a period
of no more than 2 years.
c. Expel the member.
3. Automatic Disciplinary Provisions
 CHAPTER
CHAPTER 33
PROFESSIONAL
PROFESSIONAL ETHICS
ETHICS
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