Ethics and the CPA Building Trust and

The CPA profession has placed a new emphasis on ethics. Accountants have found that it not only makes sense because it is the right thing to do, but also because it can have a positive impact on their bottom line. This book discusses both the intangible implications of maintaining ethical practices as well as the practical and profitable aspects of ethical accounting.

CHARLES H. CALHOUN, CPA, CIA, CFE, is a consultant and corporate trainer specializing in ethics, fraud examination, litigation support, and expert testimony. MARY ELLEN OLIVERIO, CPA, is Professor of Accounting in the Lubin School of Business, Pace University, New York City. PHILIP WOLITZER, CPA, is Professor Emeritus of Accounting at Long Island University.

Preface

xi

Part 1: Ethics Services CPAs Can Provide

1

(36)

Chapter 1 Ethics Services Needed

3

(18)

1.1 Perceived Need for Credibility

4

(1)

1.2 Representations About Integrity

5

(2)

1.3 Continuing Challenges to Ethical Behavior in Business

7

(4)

1.4 Conference Board: Surveys and Proceedings

11

(5)

1.5 Potential for Improvement Not Assured

16

(1)

1.6 Focus on Ethical Conduct or Penalty Avoidance

17

(1)

1.7 An Area for Development

18

(1)

1.8 An Overview of This Book

19

(2)

Chapter 2 Knowledge, Competencies, and Attitudes Relevant for New Ethics Services

21

(16)

2.1 Critical Knowledge That Independent Public Accountants Have

22

(4)

2.2 Critical Competencies Public Accountants Possess

26

(5)

2.3 Attitudes Needed to Provide Ethically Related Services

31

(2)

2.4 Significance of a Public Accounting Firm's Culture

33

(2)

2.5 The Dynamic Interaction of Knowledge and Experience

35

(2)

Part 2: Contemporary Ethical Environment: Problems and Demands

37

(62)

Chapter 3 Confusion Regarding the Value of Ethics

39

(16)

3.1 The Overriding Problem

40

(1)

3.2 Levels of Attitudes and Commitment to Ethical Standards

40

(2)

3.3 Perceptions of Ethical Conduct in the United States

42

(4)

3.4 Prevailing Problems Preceived in the Late 1970s

46

(3)

3.5 Fraudulent Behavior Disclosed

49

(4)

3.6 Implications of Cases for Ethical Standards

53

(1)

3.7 The Contemporary Challenge

54

(1)

Chapter 4 Regulatory Demands

55

(20)

4.1 Perceptions of Regulatory Burden

57

(2)

4.2 Opportunity for the Certified Public Accountant

59

(1)

4.3 Selected Laws and Regulations That Illustrate Range of Compliance Expected in the United States

59

(3)

4.4 SEC Oversight Responsibilities

62

(2)

4.5 Foreign Corrupt Practices Act

64

(1)

4.6 Federal Sentencing Guidelines

65

(3)

4.7 Representative Regulatory Agency Requirements

68

(4)

4.8 The CPA's Requirement for Finding Unethical/Illegal Behavior (SAS 82)

72

(3)

Chapter 5 Private Sector Response to Regulatory Oversight of CPAs

75

(7)

5.1 The National Commission on Fraudulent Financial Reporting (Treadway Commission)

76

(2)

5.2 Committee of Sponsoring Organizations (COSO)

78

(1)

5.3 Peer Review

79

(3)

Chapter 6 Ethics Survey Reports on CPAs

82

(17)

6.1 Business Ethics: Some Survey Results

82

(1)

6.2 Survey of Ethics: Perceptions

82

(1)

6.3 Sample Selection and Questionnaires Used

82

(2)

6.4 General Perception

84

(1)

6.5 CPAs' Behavior in Practice

84

(2)

6.6 Ethical Behavior in Business

86

(1)

6.7 Discrimination and Sexual Harassment

87

(1)

6.8 Prevention and Deterrent to Unethical Behavior

88

(3)

6.9 Solutions to Unethical Behavior

91

(1)

6.10 An Overview of the Findings

91

(1)

6.11 Implications of Findings

92

(1)

6.12 Ethics in Contemporary Organizations: The View from Young Workers

93

(4)

6.13 Implications of Findings

97

(1)

6.14 Consideration of the Findings of the Two Surveys

97

(2)

Part 3: Providing Value-Added Ethics Services

99

(70)

Chapter 7 Promoting Ethics in the CPA Firm

101

(16)

7.1 Keeping One's Own House in Order

103

(2)

7.2 "Window Dressing"

105

(1)

7.3 Conflicts of Interest

105

(1)

7.4 Substance versus Image

106

(1)

7.5 Code of Professional Conduct

107

(1)

7.6 Principles of Professional Conduct

107

(2)

7.7 Public Interest

109

(1)

7.8 Integrity

110

(1)

7.9 Rules

110

(1)

7.10 Independence, Integrity, and Objectivity

111

(1)

7.11 General Standards and Accounting Principles

112

(1)

7.12 Responsibilities to Clients

113

(1)

7.13 Other Responsibilities and Practices

114

(1)

7.14 Advertising

114

(1)

7.15 Form of Organization and Name

115

(1)

7.16 Continuing Professional Education

115

(1)

7.17 Built-in Process of Review

116

(1)

Chapter 8 Providing the Ethical Services

117

(28)

8.1 Ethics Services

117

(19)

8.2 Engagements to Benchmark Ethics Programs (Example 3)

136

(2)

8.3 Reviews by Internal Auditors

138

(2)

8.4 Independent Reviews of Ethics

140

(1)

8.5 Attestation Engagements of Ethics

140

(3)

8.6 Attestation Engagement (Example 4)

143

(1)

8.7 Opportunities Abound

143

(2)

Chapter 9 CPAs Facing the Future

145

(24)

9.1 Importance of Ethics in the Public Accounting Profession

147

(2)

9.2 Determining whether to Provide Ethics-Related Services

149

(2)

9.3 Organizations Enhancing Ethics in the Workplace: Positive Emerging Developments

151

(1)

9.4 Growing Interest in Assessing Ethical Environments

152

(3)

9.5 Developments to Enhance Quality of Ethical Environments

155

(3)

9.6 Possible Role for Education

158

(2)

9.7 Erosion of Ethical Standards

160

(1)

9.8 Challenge to CPAs in Sustaining Trust and Profitability

161

(4)

9.9 Providing Services in a Techno-Information Age

165

(1)

9.10 CPAs Encountering the New Millennium

166

(3)

Appendixes

169

(82)

A. AICPA Code of Professional Conduct

171

(6)

B. Institute of Management Accountants Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management

177

(3)

C. The Institute of Internal Auditors Code of Ethics

180

(2)

D. Phillips-Van Heusen: A Shared Commitment

182

(3)

E. Kronos: Code of Conduct and Business Ethics

185

(6)

F. National Association of State Boards of Accountancy

191

(17)

G. 1997 Federal Sentencing Guidelines

208

(43)

Index

251

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Ethics and the CPA Building Trust and Value-Added Services

Summary

Author Biography

Table of Contents

Supplemental Materials