A certified public accountant (CPA) preparing a consulting analysis must preserve objectivity even when independence is unnecessary. The AICPA Code distinguishes obligations governing professional conduct generally from additional restrictions attached to services requiring independence.
- Principles express the profession's aspirations and provide the foundation for evaluating conduct; they are not a substitute for enforceable requirements.
- Rules establish enforceable obligations, including integrity, objectivity, compliance with standards, confidentiality, and independence when the engagement requires it.
- Interpretations explain how rules apply to particular circumstances. A member departing from an interpretation bears the burden of justifying that departure in disciplinary proceedings.
- Nonauthoritative explanations and practice aids assist application but cannot override a rule or interpretation.
The principles connect individual decisions with responsibilities to financial-information users.
The AICPA Code assigns requirements according to professional role.
Applicable regulatory requirements may be stricter than the AICPA Code. The independence illustrations below concern nonissuer engagements evaluated under the Code; separate issuer and governmental requirements require their own analysis.
Integrity requires honesty in professional work, while objectivity requires impartial judgment despite personal interests, competing obligations, or pressure from others.
Common mistakes
- Office labels replace classification. A same-office manager with no other connection differs from a qualifying same-office partner; 9.5 nonattest hours also differs from 10 hours.
- Materiality excuses direct ownership. A covered person's $75 direct holding remains restricted even when a much larger indirect holding might be immaterial.
- All relatives receive identical treatment. A nondependent sister, dependent cousin, and financially independent father-in-law require different classifications before applying the relevant prohibition.
Bottom line
- Principles establish ethical aspirations, rules impose enforceable obligations, and interpretations explain application with departures requiring justification.
- Integrity, objectivity, competence, due care, planning, supervision, sufficient relevant data, and compliance with standards apply beyond audit engagements.
- Conceptual frameworks require identifying threats, evaluating significance, applying effective safeguards, and discontinuing conduct when unacceptable threats remain.
- Independence requires both mind and appearance; a specific prohibition controls before general safeguard analysis.
Exam shortcut
Classify the person before reading the investment amount: team, influence, nonattest hours, qualifying office, immediate family, or close relative. Circle the ownership object. Shares in a fund and shares held by that fund answer different questions; then inspect control and disposal rights. Mark the logical connector in the close-relative test and the denominator behind every percentage. Fund ownership, client ownership, and personal materiality are different measurements.
The full lesson (about 8,627 words, 58 min read) adds 4 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- I.A1
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