AICPA Ethics Exam UPDATED ACTUAL Questions and CORRECT Answers
1. Ethical Step 1 Recognize the ethical issue
decision-making Step 2 Gather critical facts
model Step 3 Identify Stakeholders
Step 4 Consider Alternatives
Step 5 Consider the effect of Stakeholders
Step 6 Consider your comfort level
Step 7 Consider rules, regulations, and laws
Step 8 Make a decision
Step 9 Document efforts
Step 10 Evaluate the outcome
2. The accounting 1. In Public Practice-public accounting practice
profession 2. In Business-not for profit or private firm
3. Professional and 1. American Institute of Certified Public Accountants (AICPA)-In fulfilling its mission,
regulatory bod- the AICPA works with state CPA societies and state accountancy boards, giving
ies priority to those areas where public reliance on CPA skills is most significant.
-The AICPA Professional Ethics Executive Committee (PEEC) promulgates and en-
forces ethics and independence rules that apply to all members.
2. U.S. Securities and Exchange Commission (SEC)-Its mission is to improve the
professional performance of public company auditors to ensure that financial
statements are presented fairly and have credibility.
3. Public Company Accounting Oversight Board (PCAOB)-The Sarbanes-Oxley Act
of 2002 created and authorized the PCAOB to establish auditing and related at-
testation, quality control, ethics, and independence standards for public company
auditors. The SEC oversees the PCAOB's activities.
4. U.S. Government Accountability Oflce (GAO)-The GAO issues ethics and inde-
pendence rules that apply to engagements performed under generally accepted
government auditing standards (GAGAS). These governmental standards are pub-
lished as Government Auditing Standards, commonly referred to as the "Yellow
Book."
5. U.S. Department of Labor (DOL)-Auditors of employee benefit plans that file
,reports with the DOL should be aware of the DOL interpretive bulletin on inde-
pendence.
6. U.S. Department of the Treasury/Internal Revenue Service (IRS)-The Internal
Revenue Code (IRC) authorizes the Secretary of the Treasury to set rules and
regulations necessary to enforce the U.S. tax laws. Treasury Department Circular
No. 230 governs federal tax practice before the IRS by CPAs, enrolled agents,
attorneys, and actuaries and the IRS Oflce of Professional Responsibility (OPR)
that enforces these regulations.
7. State boards of accountancy-State boards of accountancy are charged with
issuing CPA licenses and overseeing the ethical conduct of CPAs in 55 jurisdictions
in the United States. It is critically important for CPAs to know their state board's
requirements. If you are licensed by more than one state board or practice in other
states under their mobility laws, you should familiarize yourself with each state's
requirements.
8. International Federation of Accountants (IFAC)-The IFAC supports four inde-
pendence standard-setting bodies that develop standards for auditing, education,
ethics, and public sector financial reporting in the accounting profession globally.
IFAC also promotes good ethical practices by encouraging professional accounting
organizations throughout the world to adopt high ethical standards and helps
foster meaningful debate on ethical issues that accountants face. The IFAC's
International Ethics Standards Board for Accountants (IESBA) develops ethical
standards and guidance for use by professional accountants. The IESBA ethical
standards appear in the International Code of Ethics for Professional Accountants
(including International Independence Standards) (IESBA code), which serves as
a global benchmark for codes of ethics. Member bodies, such as the AICPA in the
United States, agree to maintain ethics and other professional standards that meet
this global benchmark. As a result, the IESBA code has influenced and will continue
to influence the AICPA code.
9. Others-In addition, banking, and insurance regulators, such as the U.S. Federal
Deposit Insurance Corporation (FDIC) and state insurance regulators, incorporate
the AICPA, SEC, and PCAOB rules into their regulatory requirements. Finally, state
CPA societies also have ethics codes (often, they adopt the AICPA code) that state
, society members agree to abide by.In some cases, you may be subject to rules
of different bodies. For example, auditors of public companies need to comply
with the independence rules of the AICPA, the SEC, and the PCAOB. If more than
one rule applies to a situation, you should apply the most restrictive requirement.
Although we will address many of these rules, this course focuses primarily on a
CPA's obligations under the AICPA code.
4. Code of Conduct When something is "ethical," it is in accordance with the accepted principles
of right and wrong governing the conduct of a person or the members of a
profession.1
-In general, a code of professional conduct describes the basic tenets of ethical
conduct in a profession, whether accounting, medicine, or engineering. Profes-
sions that serve the public interest adopt a code of conduct to help maintain public
confidence in the profession.
The AICPA Code of Professional Conduct (the code)
1. Membership in the AICPA is voluntary. By accepting membership, a member
assumes an obligation of self-discipline above and beyond the requirements of
laws and regulations.
2. The principles of the Code of Professional Conduct of the AICPA express the
profession's recognition of its responsibilities to the public, to clients, and to
colleagues. They guide members in the performance of their professional respon-
sibilities and express the basic tenets of ethical and professional conduct. The
principles call for an unswerving commitment to honorable behavior, even at the
sacrifice of personal advantage.
3. The first two principles in the code, "Responsibilities" and "The Public Interest,"
say, in part, that "[m]embers of the AICPA have responsibilities to all those who
use their professional services." The code also notes that "a distinguishing mark of
a profession is acceptance of its responsibility to the public." The public interest is
defined as "the collective well-being of the community of people and institutions
the profession serves."
4. These principles also indicate, in part, that "members should exercise sensitive
, professional and moral judgments in all their activities." Members should also
act in a manner that serves the public interest and honors the public trust that is
bestowed upon them as a member of the accounting profession.
Structure of the code
1. Preface-Applies to all members of the AICPA. The preface includes an overview
of the code, describes the principles, structure and application of the code, sets
forth the definitions, and provides information about changes to the code and
nonauthoritative guidance.
2. Part 1-Applies to members in public practice. These members work in audit, tax,
and consulting firms that provide professional services to clients.
3. Part 2- Applies to members in business. These members work in organizations
in executive, staff, governance, advisory, or administrative capacities.
4. Part 3-The code is available online at https://pub.aicpa.org/codeofcon-
duct/Ethics.aspx
Members of the AICPA agree to comply with the code as a condition of member-
ship, but the code applies to many non-AICPA members, too. Most state accoun-
tancy boards adopt the code or parts of the code under their laws or regulations,
making the AICPA rules applicable to the CPAs who practice public accounting in
those states and territories.
5. Principles of Pro- The Principles of Professional Conduct (ET sec. 0.300)
fessional Con- 1. Responsibilities-In carrying out your professional responsibilities, you should
duct exercise sensitive professional and moral judgment.
2. Public Interest-You should act in a way that will serve the public interest, honor
the public trust, and demonstrate your commitment to professionalism.
3. Integrity-To maintain and broaden public confidence, you should perform all
professional responsibilities with the highest sense of integrity.
4. Objectivity and Independence-You should maintain objectivity and be free of
conflicts of interest in discharging your professional duties. If you work for a public
1. Ethical Step 1 Recognize the ethical issue
decision-making Step 2 Gather critical facts
model Step 3 Identify Stakeholders
Step 4 Consider Alternatives
Step 5 Consider the effect of Stakeholders
Step 6 Consider your comfort level
Step 7 Consider rules, regulations, and laws
Step 8 Make a decision
Step 9 Document efforts
Step 10 Evaluate the outcome
2. The accounting 1. In Public Practice-public accounting practice
profession 2. In Business-not for profit or private firm
3. Professional and 1. American Institute of Certified Public Accountants (AICPA)-In fulfilling its mission,
regulatory bod- the AICPA works with state CPA societies and state accountancy boards, giving
ies priority to those areas where public reliance on CPA skills is most significant.
-The AICPA Professional Ethics Executive Committee (PEEC) promulgates and en-
forces ethics and independence rules that apply to all members.
2. U.S. Securities and Exchange Commission (SEC)-Its mission is to improve the
professional performance of public company auditors to ensure that financial
statements are presented fairly and have credibility.
3. Public Company Accounting Oversight Board (PCAOB)-The Sarbanes-Oxley Act
of 2002 created and authorized the PCAOB to establish auditing and related at-
testation, quality control, ethics, and independence standards for public company
auditors. The SEC oversees the PCAOB's activities.
4. U.S. Government Accountability Oflce (GAO)-The GAO issues ethics and inde-
pendence rules that apply to engagements performed under generally accepted
government auditing standards (GAGAS). These governmental standards are pub-
lished as Government Auditing Standards, commonly referred to as the "Yellow
Book."
5. U.S. Department of Labor (DOL)-Auditors of employee benefit plans that file
,reports with the DOL should be aware of the DOL interpretive bulletin on inde-
pendence.
6. U.S. Department of the Treasury/Internal Revenue Service (IRS)-The Internal
Revenue Code (IRC) authorizes the Secretary of the Treasury to set rules and
regulations necessary to enforce the U.S. tax laws. Treasury Department Circular
No. 230 governs federal tax practice before the IRS by CPAs, enrolled agents,
attorneys, and actuaries and the IRS Oflce of Professional Responsibility (OPR)
that enforces these regulations.
7. State boards of accountancy-State boards of accountancy are charged with
issuing CPA licenses and overseeing the ethical conduct of CPAs in 55 jurisdictions
in the United States. It is critically important for CPAs to know their state board's
requirements. If you are licensed by more than one state board or practice in other
states under their mobility laws, you should familiarize yourself with each state's
requirements.
8. International Federation of Accountants (IFAC)-The IFAC supports four inde-
pendence standard-setting bodies that develop standards for auditing, education,
ethics, and public sector financial reporting in the accounting profession globally.
IFAC also promotes good ethical practices by encouraging professional accounting
organizations throughout the world to adopt high ethical standards and helps
foster meaningful debate on ethical issues that accountants face. The IFAC's
International Ethics Standards Board for Accountants (IESBA) develops ethical
standards and guidance for use by professional accountants. The IESBA ethical
standards appear in the International Code of Ethics for Professional Accountants
(including International Independence Standards) (IESBA code), which serves as
a global benchmark for codes of ethics. Member bodies, such as the AICPA in the
United States, agree to maintain ethics and other professional standards that meet
this global benchmark. As a result, the IESBA code has influenced and will continue
to influence the AICPA code.
9. Others-In addition, banking, and insurance regulators, such as the U.S. Federal
Deposit Insurance Corporation (FDIC) and state insurance regulators, incorporate
the AICPA, SEC, and PCAOB rules into their regulatory requirements. Finally, state
CPA societies also have ethics codes (often, they adopt the AICPA code) that state
, society members agree to abide by.In some cases, you may be subject to rules
of different bodies. For example, auditors of public companies need to comply
with the independence rules of the AICPA, the SEC, and the PCAOB. If more than
one rule applies to a situation, you should apply the most restrictive requirement.
Although we will address many of these rules, this course focuses primarily on a
CPA's obligations under the AICPA code.
4. Code of Conduct When something is "ethical," it is in accordance with the accepted principles
of right and wrong governing the conduct of a person or the members of a
profession.1
-In general, a code of professional conduct describes the basic tenets of ethical
conduct in a profession, whether accounting, medicine, or engineering. Profes-
sions that serve the public interest adopt a code of conduct to help maintain public
confidence in the profession.
The AICPA Code of Professional Conduct (the code)
1. Membership in the AICPA is voluntary. By accepting membership, a member
assumes an obligation of self-discipline above and beyond the requirements of
laws and regulations.
2. The principles of the Code of Professional Conduct of the AICPA express the
profession's recognition of its responsibilities to the public, to clients, and to
colleagues. They guide members in the performance of their professional respon-
sibilities and express the basic tenets of ethical and professional conduct. The
principles call for an unswerving commitment to honorable behavior, even at the
sacrifice of personal advantage.
3. The first two principles in the code, "Responsibilities" and "The Public Interest,"
say, in part, that "[m]embers of the AICPA have responsibilities to all those who
use their professional services." The code also notes that "a distinguishing mark of
a profession is acceptance of its responsibility to the public." The public interest is
defined as "the collective well-being of the community of people and institutions
the profession serves."
4. These principles also indicate, in part, that "members should exercise sensitive
, professional and moral judgments in all their activities." Members should also
act in a manner that serves the public interest and honors the public trust that is
bestowed upon them as a member of the accounting profession.
Structure of the code
1. Preface-Applies to all members of the AICPA. The preface includes an overview
of the code, describes the principles, structure and application of the code, sets
forth the definitions, and provides information about changes to the code and
nonauthoritative guidance.
2. Part 1-Applies to members in public practice. These members work in audit, tax,
and consulting firms that provide professional services to clients.
3. Part 2- Applies to members in business. These members work in organizations
in executive, staff, governance, advisory, or administrative capacities.
4. Part 3-The code is available online at https://pub.aicpa.org/codeofcon-
duct/Ethics.aspx
Members of the AICPA agree to comply with the code as a condition of member-
ship, but the code applies to many non-AICPA members, too. Most state accoun-
tancy boards adopt the code or parts of the code under their laws or regulations,
making the AICPA rules applicable to the CPAs who practice public accounting in
those states and territories.
5. Principles of Pro- The Principles of Professional Conduct (ET sec. 0.300)
fessional Con- 1. Responsibilities-In carrying out your professional responsibilities, you should
duct exercise sensitive professional and moral judgment.
2. Public Interest-You should act in a way that will serve the public interest, honor
the public trust, and demonstrate your commitment to professionalism.
3. Integrity-To maintain and broaden public confidence, you should perform all
professional responsibilities with the highest sense of integrity.
4. Objectivity and Independence-You should maintain objectivity and be free of
conflicts of interest in discharging your professional duties. If you work for a public
