The AICPA Code of Professional Conduct

Who the Code binds and how it is built

The AICPA Code of Professional Conduct governs AICPA members. State boards of accountancy license CPAs and set their own conduct rules; many adopt all or part of the AICPA Code, but the details vary by state, so a CPA must follow both the Code and the rules of each board that licenses them (AICPA & CIMA, Ethics). On the exam, assume the AICPA Code applies unless the question points you to the SEC, PCAOB, GAO or Department of Labor (next lessons).

The Code is organized as follows:

Part	What it covers
Preface	Applicable to all members: the principles of professional conduct, the structure of the Code and how to use it
Part 1	Members in public practice: the rules (Integrity and Objectivity, Independence, General Standards, and so on) and their interpretations
Part 2	Members in business (for example a controller or CFO)
Part 3	Other members (retired or unemployed members)
Definitions	Terms used throughout, such as attest client, covered member and immediate family

Within each part, rules are the enforceable requirements, interpretations explain how a rule applies in particular situations, and ethics rulings apply rules to specific facts (AICPA & CIMA, Ethics). A member who departs from an interpretation must be able to justify the departure, so on the exam treat interpretations as binding.

The principles

The principles are the Code's foundation. They are aspirational rather than enforceable, but every rule grows out of them:

Principle	In one sentence
Responsibilities	Use sensitive professional and moral judgment in all professional activities.
The public interest	Act in a way that serves the public interest, honors the public trust and shows commitment to professionalism.
Integrity	Perform all responsibilities with the highest sense of integrity.
Objectivity and independence	Be objective and free of conflicts of interest; a member in public practice should be independent in fact and appearance when providing auditing and other attestation services.
Due care	Observe technical and ethical standards, keep improving competence and do your best work.
Scope and nature of services	Consider all the principles when deciding which services to provide.

The conceptual framework

The rules cannot foresee every situation. When no rule or interpretation addresses a relationship or circumstance, a member applies the conceptual framework:

1. Identify threats to compliance with the rules.
2. Evaluate the significance of each threat: would a reasonable and informed third party, weighing all the facts, conclude that compliance is compromised? If not, the threat is at an acceptable level.
3. Apply safeguards to eliminate a threat or reduce it to an acceptable level. If no safeguard can do so, decline or end the service (or, for independence, independence is impaired).

There are two versions: one for members in public practice and one for members in business. The threat categories in the conceptual framework interpretations (AICPA Code, available through the AICPA's Online Ethics Library) are below; the members-in-business framework has the same list except management participation:

Threat	Example
Adverse interest	The client has sued the firm over last year's work.
Advocacy	The member promotes the client's securities or argues its position to a regulator.
Familiarity	The engagement partner's sister is the client's controller.
Management participation	The member makes decisions that belong to the client's management (public practice only).
Self-interest	One client's fees are a large share of the firm's revenue.
Self-review	The member audits records the member prepared.
Undue influence	The CEO threatens to replace the firm unless it accepts an aggressive accounting choice.

Safeguards come from the profession or regulators (education, peer review, standards), from the client (a strong audit committee, competent management) and from the firm (quality management, rotating personnel, an extra review by someone outside the engagement).

Integrity and objectivity

The Integrity and Objectivity Rule requires a member to be honest and candid, to be free of conflicts of interest, and never to knowingly misrepresent facts or subordinate judgment to others. Its interpretations address:

• Conflicts of interest. A conflict arises when a service for one client is adverse to another client's interests, or when the member's own interests conflict with the client's. The member must take reasonable steps to identify conflicts, evaluate them under the conceptual framework and, when the threat is not eliminated, disclose the conflict to the affected clients and obtain their consent. Some conflicts are so serious that no disclosure cures them, and the member must decline.
• Gifts and entertainment. Offering or accepting gifts or entertainment creates self-interest, familiarity or undue influence threats unless the gift is reasonable in the circumstances. For attest clients, independence rules are stricter (next lesson).
• Subordination of judgment. If a member disagrees with a supervisor or client about a material matter, such as a misstatement, the member should take the concern up the chain (supervisor, then higher management or those charged with governance), document the matter, and consider whether to resign or report outside the organization where the law requires. Going along quietly with a materially misstated report violates the rule.
• Client advocacy. Members may advocate for clients (for example in a tax dispute) as long as they keep their integrity; aggressive advocacy can threaten independence for an attest client.
• Members in business must not knowingly prepare, sign or allow misleading records or financial statements.

General standards and compliance with standards

The General Standards Rule requires, for every professional service: professional competence (undertake only work you can complete competently, alone or with appropriate consultation), due professional care, adequate planning and supervision, and sufficient relevant data to support conclusions.

The Compliance With Standards Rule requires compliance with the technical standards of bodies designated by AICPA Council, such as the Auditing Standards Board, the Accounting and Review Services Committee and the PCAOB for the services they cover.

The Accounting Principles Rule prohibits a member from expressing an opinion, or stating affirmatively, that financial statements conform with GAAP when they contain a departure with a material effect. The one exception: if unusual circumstances mean that following GAAP would make the statements misleading, the member may comply by disclosing the departure, its approximate effects and why GAAP would have been misleading.

Fees, advertising and firm names

Contingent fees. A contingent fee depends on a finding or result, for example "20% of the tax refund we obtain". A member may not charge one to a client for whom the member performs an audit or review of financial statements, a compilation that a third party is expected to use (unless the report discloses the member's lack of independence), or an examination of prospective financial information. A contingent fee is also prohibited for preparing an original or amended tax return or claim for refund. Fees fixed by courts or public authorities, and fees in tax matters based on the results of judicial proceedings or the findings of government agencies, are not contingent fees.

Commissions and referral fees. The same attest-client restrictions apply to commissions for recommending or referring a product or service. Where a commission is permitted, it must be disclosed to the client. Referral fees for recommending another CPA's services must also be disclosed.

Advertising and solicitation. A member may advertise but may not use false, misleading or deceptive claims (for example implying the ability to influence a court or regulator, or creating unjustified expectations of results).

Form of organization and name. A member may practice in any form of organization allowed by state law that meets Council's requirements, under a name that is not misleading. A firm may describe itself as "Members of the AICPA" only if all of its CPA owners are members.

Confidential client information

The Confidential Client Information Rule forbids disclosing confidential client information without the client's specific consent. It does not prevent a member from:

• meeting professional obligations under the Compliance With Standards and Accounting Principles rules;
• complying with a validly issued and enforceable subpoena or summons, or with applicable laws and regulations;
• taking part in peer review or quality reviews; or
• responding to an inquiry or investigation by the AICPA, a state CPA society or a state board.

Third-party service providers. Firms increasingly use outsourced staff, cloud platforms and software providers. Before sharing confidential client information with a third-party provider, the Code expects the member either to have a contract under which the provider keeps the information confidential (with reasonable assurance that it has procedures to prevent unauthorized release) or to obtain the client's specific consent. The member also remains responsible, under the General Standards Rule, for the quality of the outsourced work.

Automated and AI tools. The blueprint asks you to apply these rules to automated and AI tools. The Code's general requirements are what apply:

Situation	How the rules apply
Uploading a client's general ledger to a public AI chatbot whose terms allow it to retain or train on inputs	The provider receives confidential client information with no confidentiality agreement: a disclosure without consent. Do not do it without consent or an appropriate agreement.
Using an enterprise AI tool licensed by the firm under a contract that bars retention and use of inputs	Treated like any third-party provider with a confidentiality agreement; the member still reviews the output with due care.
Accepting an AI-generated analysis without checking it	A General Standards issue (due professional care, sufficient relevant data), regardless of confidentiality.

Acts discreditable

The Acts Discreditable Rule prohibits conduct that discredits the profession. Its interpretations include discrimination and harassment in employment practices; soliciting or disclosing CPA Exam questions or answers; failing to file a required tax return or pay a tax liability; negligently making or permitting materially false entries in financial statements or records; failing to follow the requirements of government bodies, commissions or regulatory agencies for audits of entities they oversee; and misusing confidential information from employment.

Records requests are a frequent exam topic. The Code distinguishes:

Type of record	Must the member provide it when the client asks?
Client-provided records (the client's own documents)	Yes, even if fees are unpaid. Retaining them to force payment is an act discreditable.
Member-prepared records the client lacks, such as adjusting entries the member wrote	Yes, unless fees are due for that specific work product.
Records the member prepared for a completed and issued work product (for example a tax return)	Yes, unless fees are due for that specific work product.
The member's working papers	No. Working papers belong to the member, though the member must keep client information in them confidential.

Worked example: the AI-assisted reconciliation

Elena, a senior at a CPA firm, compiles quarterly statements for Harbor Pine Foods, Inc. To save time she pastes Harbor Pine's bank and ledger detail into a free online AI service and asks it to reconcile them. She then gives the reconciliation to her manager without reviewing it.

• Confidentiality: The free service's terms allow it to keep inputs. Elena disclosed confidential client information to a third party without a confidentiality agreement or Harbor Pine's consent.
• General Standards: She relied on output she did not check: no due professional care and no sufficient relevant data.
• What she should have done: use a firm-approved tool covered by a confidentiality agreement (or obtain Harbor Pine's specific consent) and review the reconciliation as carefully as if a junior staff member had prepared it.

Common traps

• Confusing principles (aspirational) with rules (enforceable).
• Thinking a member may hold client records hostage for unpaid fees. Client-provided records must be returned.
• Treating every contingent fee as banned. They are banned only for the attest and tax-return services listed above; elsewhere they are allowed.
• Forgetting that the conceptual framework is used only when no rule or interpretation addresses the situation, and that when a threat cannot be reduced to an acceptable level, the answer is to decline or withdraw.

Check yourself

1. Which six principles underlie the Code, and are they enforceable?
2. List the three steps of the conceptual framework and the seven threat categories for members in public practice.
3. A tax client asks you to prepare its amended return for 25% of the refund. May you?
4. Your audit client asks for the receipts it gave you; it owes you fees. What must you do?
5. Name two situations in which a member may disclose confidential information without the client's consent.
6. What two options does a member have before sharing confidential information with a third-party service provider?
7. When may a member say statements conform with GAAP despite a material departure?