Many of us grew up in households with rules that our parents insisted that we obey.
Treat your teachers with respect. Watch out for your little brother. Be home in time for dinner.
The rules were easy to understand. If you followed them, you stayed out of trouble. But what happened when the job of watching out for your little brother meant you were going to be late for dinner?
You had a decision to make, and you’d have to rely on some overarching principles to guide your actions and help you do the right thing.
This is the case with CPAs as they work to maintain their integrity and reliability. AICPA members are required to follow a Code of Professional Conduct that prescribes the proper course of action for an incredibly detailed list of situations.
Can an AICPA member accept a meal from an audit client while on an engagement? It’s in the Code.
Can a member audit a financial services client who provides a student loan to the member’s son? It’s in the Code.
Do client confidentiality obligations prevent an auditor who withdraws from an engagement from telling the successor auditor about the irregularities that caused the withdrawal? That, too, is covered in the Code.
But the Code can’t cover every circumstance and situation that a CPA might encounter. Fortunately, the Code also contains guidance for how to operate ethically and with integrity in these situations.
This guidance is contained in the Code’s three conceptual frameworks — one for members in public practice, one for members in business and a third for preserving independence in general. These frameworks provide members with guidance on how to proceed when the Code’s literature doesn’t provide rules, interpretations, or examples to address a specific situation.
The frameworks are based on procedures that standard setters follow when they enter uncharted territory while creating guidance for CPAs. The frameworks describe:
How to identify and evaluate the significance of threats that may jeopardize a member’s compliance with the rules in the Code.
How to identify and appropriately apply safeguards that may reduce a threat to an acceptable level.
Examples of specific categories of threats that a member may encounter.
Examples of specific safeguards that a member may apply to reduce the significance of a threat.
The AICPA provides toolkits showing members how to use the conceptual frameworks and has developed soon-to-be-added guidance on how CPAs should consider various unconscious biases that might affect their professional judgment in these considerations.
All this structure was created to help CPAs maintain the highest level of integrity, objectivity, professionalism and independence as they perform their services to protect the public interest. You might not have ever figured out whether it was more important to look after your brother or be home in time for dinner. But you can be comforted that CPAs adhere to carefully constructed guidance as they ponder much more weighty questions.