Changes in the Code of Conduct

By: Melisa Galasso

The AICPA’s Professional Ethics Executive Committee (PEEC) recently restructured and improved the AICPA Code of Professional Conduct. The updated Code was effective on December 15, 2014 and many of the changes impact both members in business & industry as well as those in public accounting.

The Code has also been restructured with separate parts for members in industry separate from members in public practice. Part 1 applies specifically to AICPA members in public practice, while Part 2 applies to members in business. In addition, Part 3 applies to all other members, including those who are retired or between jobs. This will allow those in industry to focus on only the parts of the Code that apply to them without having to review information that is specific to only those in public practice (like independence).

In addition, the code has been reorganized by topic with a new numbering system making it easier to find the information you are searching for. This is similar to the Codification of the FASB standards where you will no longer have to be familiar with the original issuance document. Instead, the Code is ordered by topic with the most recent information only. The new number system can be interpreted as follows—ET section A.BBB.CCC. The A denotes the part number. The BBBs are the topics and CCCs are the subtopics or sections. For examples, the proper citation for the scope of nonattest services under independence for public accountants would be 1.295.010. The one indicating it is for members in public practice. Section 200 deals with independence in general. Topic 295 is specifically nonattest services. Section 010 pertains to scope and applicability. The old “101-3” citations no longer apply.

One of the biggest changes to the Code of Conduct is the addition of a principles-based concept. When the Code does not specifically address your question (a rule), the Updated Code includes a Conceptual Framework to allow members to determine whether or not to proceed. This includes a threats and safeguards approach to decision making (a principle). If something is specifically prohibited by the Code, a member cannot use the conceptual framework with safeguards to overcome the rule. However, if the Code is silent to the particular item, then the framework kicks in. This is the major substantive change in the Code. The Framework applies to both members in industry as well as those in public practice.

Finally, navigating the code is easier with the new dynamic online platform that can be found at Access to the Code of Conduct is free through this website. The search functionality can assist members in finding the information and rules they need more efficiently. In addition, if there is an area you frequently have to research, there is bookmarking capability so you don’t have to repeat your search.

For those in public practice, coinciding around the effective date of the Code, many changes to independence and other public accounting specific items went into effect. The main areas for consideration are conflicts of interest, the definition of “those charged with governance,” subordination of judgment, the definition of partner equivalent, and the changes around “affiliates.”

Members in public practice as well as those in industry are encouraged to familiarize themselves with the Updated Code as well as the new Conceptual Framework.

MelisaGalasso_avatar-70x70Melisa is a Senior Manager in the Professional Practices Department at Cherry Bekaert LLP, in Charlotte. She currently serves as Chair of the NCACPA’s Accounting & Attestation Committee and is President of the Charlotte Chapter. Melisa can be reached at