Ethics for Arkansas CPAs – 4 Hours

This course takes a deliberately broad view of professional ethics before it reaches a single rule. It opens with what an ethic actually is, why a profession's standards should sit higher than an ordinary citizen's, and why a code of conduct represents a minimum rather than a target. Along the way it draws on Socrates on virtue and knowledge, John Austin on natural law, Marcus Aurelius on the difference between a man who is upright and one who is merely kept upright, C. S. Lewis's collection of moral-law sayings from Hindu, Chinese, Babylonian, Egyptian and Roman sources, and the Rotary Four-Way Test as a practical screen for everyday decisions. The author, a university professor of thirty-five years, also takes on the common claim that ethics cannot be taught to adults, and argues that awareness of consequences is what actually changes behaviour.

From there the course turns to the AICPA Code of Professional Conduct and works through it systematically. It explains how the Code is built — principles, rules, interpretations and formal ethics rulings — how interpretations are exposed and adopted, how publication in the Journal of Accountancy constitutes notice to members, and where the burden falls on a CPA who departs from an interpretation. It covers the Code's three parts for members in public practice, members in business, and all other members, and the rule that a CPA holding more than one role applies the most restrictive provision.

The six Principles are treated in turn: Responsibilities, the Public Interest, Integrity, Objectivity and Independence, Due Care, and Scope and Nature of Services. The course then works through the definitions that decide how the rules actually apply in practice — covered member, attest client, affiliate, close relative, immediate family, direct and indirect financial interest, joint closely held investment, network firm, partner equivalent, and the period of the professional engagement — because many independence questions turn on which of these labels attaches to a person or entity.

Part 1 of the Code, governing members in public practice, is covered in detail. The course sets out the conceptual framework a CPA applies when no rule addresses the situation at hand: identify the threat, evaluate its significance against the reasonable and informed third party standard, and apply safeguards, recognising that some threats admit of no safeguard at all. It examines the seven categories of threat — adverse interest, advocacy, familiarity, management participation, self-interest, self-review and undue influence — with worked examples of each, and the three categories of safeguard created by the profession, implemented by the client, and implemented by the firm. It then addresses the Integrity and Objectivity Rule, conflicts of interest and the disclosure and consent they require, director positions, gifts and entertainment, knowing misrepresentation in financial statements or records, subordination of judgment to a supervisor, client advocacy, use of third-party service providers, and the Independence Rule together with its own conceptual framework and documentation requirement.

Throughout, the rules are anchored to short case studies rather than left abstract: an auditor who learns of a client's confidential property plans and must decide whether he may ever speak of them; a tax partner who considers taking on an audit engagement after a day or two of reading; a financial planner whose advertisement promises returns he cannot guarantee; and an auditor offered a bonus to accept an inflated net income, examined through what he stands to lose, what his signature ceases to be worth, and why he would have no leverage to refuse the second request.

Learning objectives

Upon completion of this course, participants will be able to:

1. To examine the philosophical aspects of ethics (Unit One)
2. To understand the “trust” function in our society (Unit One)
3. To discuss definitions of terms that are necessary to understand ethics (Unit Two)
4. To understand the newer rules of Independence (Unit Two)
5. To describe the applicability of the rules (Unit Three)
6. To differentiate Independence in Appearance and Fact (Unit Three)
7. To examine the CPA’s responsibilities to clients (Unit Three)
8. To examine the impact of non-attest services (Unit Four)
9. To understand the rules and regulations pertaining to ethical conduct. (Unit Five)
10. Examine the role of the attorney in our society (Unit Five)
11. Be able to discuss the Internal Auditor’s Code (Unit Five)
12. To discuss the impact of various court cases on the profession (Unit Five)