Free «Code of Professional Ethics and Conduct» Essay Sample

Rule 102 (Integrity and Objectivity)

The Case of Paul T. Fink of Eagan, MN

Evidence was forwarded to the ECA (Ethics Charging Authority) consisting of the Professional Ethics Executive Committee of the AICPA and the MSCPA claiming a potential issue requiring disciplinary action with regard to Paul T. Fink’s conduct in the delivery of professional services as CFO and director of the “entity”, which is a publicly owned corporation. Following a thorough investigation, Mr. Fink was accused of violating Rule 102 (Integrity and objectivity) of the AICPA and MSCPA’s Rules of Professional Conduct.

The expectation of Rule 102

A member is said to have violated Rule 102 when he or she:

• Makes intentional falsifications in the preparation of financial records or statements.
• Directs or permits another to put a signature on a document containing misleading and materially false facts and information.

How the Rule 102 was Violated

Mr. Fink had prior knowledge of and partook in dating-back shipping records when it was required that they gather letters of credit that were almost expiring whose terms were yet to be fulfilled. 

With regard to the entity’s sale to a main client acknowledged in the quarter ending on March 31, 1996, Mr. Fink confessed he signed an invoice that comprised, as backing, a bill of lading that was prepared internally dated March 29^th, 1996, which was in disagreement with the inland bill of lading of April 5, 1996, signed by the carrier. 

Disciplinary Action:

• On account of Article XIV of the MSCPA bylaws and section 7.4 AICPA bylaws, Mr. Fink was to give up his civil liberties of a proper hearing.
• He was ousted from the MSCPA and AICPA.
• The ECA published the agreement regarding his settlement terms, the charges, the name of his former employer, and his name.

Opinion on and Rationale of Disciplinary Action taken

Mr. Fink had prior knowledge of and partook in dating-back shipping records when it was required that they gather letters of credit hat were almost expiring whose terms were yet to be fulfilled. 

The AIPCA could prevent this type of breach in the code of conduct in the future by ensuring that CFO’s regularly present the financial records and give an account of any irregularities if there exist any

Rule 201 ( Professional Competence)

The Case of Szabo, Craig A. Calabasas, CA 

Evidence was forwarded to the ECA comprising of the AICPA relevant committee, claiming a potential issue requiring disciplinary action with regard to Mr. Szabo’s execution of professional services relating to the audit of the “Plan”, which was a workers benefit plan. Following an investigation, Mr. Szabo was accused of violating Rule 201 of AICPA’s Rules of Professional Conduct

Expectations of Rule 201

A member is expected to fulfill the following principles and with any further interpretations by bodies elected by Council.

• Sufficient Relevant Data: Acquire adequate relevant data to afford a practical basis for recommendations or conclusions with regard to any professional services executed.
• Planning and Supervision: Sufficiently oversee and plan the execution of professional services.
• Due Professional Care: Ensure due professional care in the execution of professional services.
• Professional Competence: Embark on only those professional activities that the member’s company or member can rationally expect to be accomplished with professional competence.

How Rule 201 was Violated

The auditor’s reissued and original scope of views erroneously denoted Note H as the note comprising of a brief inventory of transactions and investment balances that did not require auditing. The auditor’s original management representation and engagement letters incorrectly specified that he would and had done a full range audit.

Disciplinary Action:

• On account section 7.4 of AICPA bylaws, Mr. Volpe was to give up his civil liberties to a hearing.
• He was suspended from the AICPA, for two years
• The ECA published the agreement regarding his settlement terms, the charges, the name of his former employer, and his name.
• He was also prohibited from carrying out peer reviews.

Opinion on and Rationale of Disciplinary Action taken

I agree with the disciplinary action taken as I believe that the auditor lacked the professional competence to accomplish his part as partner of engagement.

The AIPCA could prevent this type of breach in the code of conduct in the future by instituting regular performance competence tests on auditors of the member companies

Rule 202 (Compliance with Standards)

The Case of David Michael of New York, NY

Evidence was forwarded to the ECA comprising of the NYSSCPA and AICPA relevant committees, claiming a potential issue requiring disciplinary action with regard to David Michael’s conduct in the delivery of professional services in the audit of the financial records of the “company”, which is a publicly owned company for the year ending on June 30^th, 1995. Following a thorough investigation, CPA PC of Michael, Adest & Company, Mr. Michael, was accused of violating Rule 202 of the AICPA and NYSSCPA’s Rules of Professional Conduct

Expectation of Code 202

A member who does tax, management consulting, compilation, review, auditing, or other professional services is obligated to follow standards propagated by bodies elected by Council.

How Rule 202 was Violated

Mr. Michael did not obtain enough evidential material to support the worth of the artwork bought through the allotment of their preferred shares. This failure was because Mr. Michael did not acquire a verifiable moderator or third party to back management representations that the artwork was bought, not handed over, as of June 30^th, 1995.

Mr. Michael did not obtain enough evidential material to back the computer software value bought through the allotment of their preferred shares. This failure was because Mr. Michael did not execute adequate measures to establish that the Company had possession of the software, contrary to only acquiring a warrant to use the software.

Disciplinary Action:

• On account of Article XII, Section 11 of NYSSCPA bylaw and section 7.4 AICPA bylaws, Mr. Fink was to give up his civil liberties to a hearing.
• He was ousted from the NYSSCPA and AICPA, in effect from May 21^st, 2005
• The ECA published the agreement regarding his settlement terms, the charges, the name of his former employer, and his name.

Opinion on and Rationale of Disciplinary Action taken

I agree with the disciplinary action taken due to the fact that Mr. Michael did not acquire a suitable evaluation or any other confirmation to back the artwork’s valuation. There was also inadequate basis to know the software’s worth on the basis of the preferred shares tradable by the Company and the assessment delivered by the Company.

The AIPCA could prevent this type of breach in the code of conduct in the future by monitoring the activities of member who do tax, management consulting, compilation, review, auditing, or other professional services in member firms and ensuring that they follow standards propagated by bodies elected by Council.

Rule 501 (Acts Discreditable)

The Case of David C. Volpe of Stoughton, MA

Evidence was forwarded to the ECA comprising of the AICPA relevant committee, claiming a potential issue requiring disciplinary action with regard to David C. Volpe’s actions as interim Consultant and CFO of Chancellor Corporation.

The expectation of Rule 501

A member is considered to have violated rule 501 [ET section 501.01] by committing an act discreditable in regard to the profession if, by virtue of their negligence, this member:

• Directs or permits or makes another to create, misleading entries and materially false in the records or financial statements of an entity; or
• Does not correct an entity’s records or financial statements that are misleading and materially false when the authority to record an entry is in the hands of the member; or
• Directs or permits another to put their signature on a document comprising misleading and materially false data.

How the Code 501 was Violated

Mr. Volpe had prior knowledge or was irresponsible of not having prior knowledge that Chancellor’s records and books of accounts filed on Forms 10-QSB and 10-KSB for the fiscal quarter ending on March 31^st, 1999 and fiscal year ending on December 31^st, 1998 respectively, and the facts contained within Forms 8-K tabled during March and February 1999 were misleading and substantially false.

Mr. Volpe had prior knowledge or was irresponsible of not having prior knowledge that Chancellor’s demeanor was inappropriate and considerably assisted in preserving Chancellor’s misleading and materially false records and books for the quarter ending on March 31^st, 1999 and the years ending on December 31^st, 1998.

Disciplinary Action:

• On account section 7.4 of AICPA bylaws, Mr. Volpe was to give up his civil liberties to a hearing.
• He was ousted from the AICPA, in effect from January 26, 2005.
• The ECA published the agreement regarding his settlement terms, the charges, the name of his former employer, and his name.

Opinion on and Rationale of Disciplinary Action taken

I believe that the disciplinary action taken was fair due to the fact that Mr. Volpe had prior knowledge or was irresponsible of not having prior knowledge and significantly assisted in Chancellor’s failure in devising and maintaining a structure of internal accounting panels suitable for providing practical assurances that the corporation’s transactions were documented as needed to allow preparation of financial records in conformity with Commonly Accepted Accounting Principles during the quarter ending on March 31^st, 1999 and the year ending on December 31^st, 1998.

The AIPCA could prevent this type of breach in the code of conduct in the future by regularly checking financial records such as Forms 10-QSB and 10-KSB of member firms and making sure they have the correct information.