The COCPA’s Code of Professional Conduct consists of the guidelines that make us an effective, trusted, and sustainable organization.
The Code of Professional Conduct of the Colorado Society of Certified Public Accountants consists of two sections: (1) the Principles and (2) the Rules. The Principles provide the framework for the Rules, which govern the performance of professional services by members. The Council of the American Institute of Certified Public Accountants (AICPA) is authorized to designate bodies to promulgate technical standards under the Rules, and the Bylaws require adherence to those Rules and standards.
The Code of Professional Conduct was adopted by the membership to provide guidance and rules to all members – those in public practice, in industry, in government, and in education – in the performance of their professional responsibilities.
Compliance with the Code of Professional Conduct, as with all standards in an open society, depends primarily on members’ understanding and voluntary actions, secondarily on reinforcement by peers and public opinion, and ultimately on disciplinary proceedings, when necessary, against members who fail to comply with the Rules.
Interpretations of Rules of Conduct consist of interpretations which have been adopted, after exposure to State Societies, State Boards, Practice Units, and other interested parties, by the AICPA Professional Ethics Division’s Executive Committee to provide guidelines as to the scope and application of the Rules but are not intended to limit such scope or application. A member who departs from such guidelines shall have the burden of justifying such departure in any disciplinary hearing. Interpretations, which existed before the adoption of the AICPA Code of Professional Conduct on January 12, 1988, will remain in effect until further action is deemed necessary. These interpretations are adopted by reference as a part of the Code of Professional Conduct.
Ethics Rulings consist of formal Rulings made by the AICPA Professional Ethics Division’s Executive Committee after exposure to State Societies, State Boards, Practice Units, and other interested parties. These Rulings summarize the application of Rules of Conduct and interpretations to a particular set of factual circumstances. Members who depart from such rulings in similar circumstances will be requested to justify such departures. Ethics Rulings which existed before January 12, 1988, will remain in effect until further action is deemed necessary. These Ethics Rulings are adopted by reference as part of the Code of Professional Conduct.
Publication of an interpretation or Ethics Ruling in the Journal of Accountancy constitutes notice to members. Hence, the effective date of the pronouncement is the last day of the month in which the pronouncement is published in the Journal of Accountancy. The Professional Conduct Board will take into consideration the time that would have been reasonable for the member to comply with the pronouncement.
A member should also consult, if applicable, the Ethical Standards of the Colorado or other State Board of Accountancy which has licensed the member, Public Company Accounting Oversight Board, Securities and Exchange Commission, and any other governmental agency which may regulate his or her client’s business or use his or her report to evaluate the client’s compliance with applicable laws and related regulations.
Membership in the Colorado Society of Certified Public Accountants is voluntary. By accepting membership, a certified public accountant assumes an obligation of self-discipline above and beyond the requirements of laws and regulations. These Principles of the Code of Professional Conduct of the Colorado Society of Certified Public Accountants 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 responsibilities 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.
In carrying out their responsibilities as professionals, members should exercise sensitive professional and moral judgments in all their activities. As professionals, certified public accountants perform an essential role in society. Consistent with that role, members of the Colorado Society of Certified Public Accountants have responsibilities to all those who use their professional services. Members also have a continuing responsibility to cooperate with each other to improve the art of accounting, maintain the public’s confidence, and carry out the profession’s special responsibilities for self-governance. The collective efforts of all members are required to maintain and enhance the traditions of the profession.
Members should accept the obligation to act in a way that will serve the public interest, honor the public trust, and demonstrate commitment to professionalism.
A distinguishing mark of a profession is acceptance of its responsibility to the public. The accounting profession’s public consists of clients, credit grantors, governments, employers, investors, the business and financial community, and others who rely on the objectivity and integrity of certified public accountants to maintain the orderly functioning of commerce. This reliance imposes a public interest responsibility on certified public accountants. The public interest is defined as the collective well being of the community of people and institutions the profession serves.
In discharging their professional responsibilities, members may encounter conflicting pressures from among each of those groups. In resolving those conflicts, members should act with integrity, guided by the precept that when members fulfill their responsibility to the public, clients’ and employers’ interests are best served.
Those who rely on certified public accountants expect them to discharge their responsibilities with integrity, objectivity, due professional care, and a genuine interest in serving the public. They are expected to provide quality services, enter into fee arrangements, and offer a range of services – all in a manner that demonstrates a level of professionalism consistent with these Principles of the Code of Professional Conduct.
All who accept membership in the Colorado Society of Certified Public Accountants commit themselves to honor the public trust. In return for the faith that the public reposes in them, members should seek continually to demonstrate their dedication to professional excellence.
To maintain and broaden public confidence, members should perform all professional responsibilities with the highest sense of integrity.
Integrity is an element of character fundamental to professional recognition. It is the quality from which the public trust derives and the benchmark against which a member must ultimately test all decisions.
Integrity requires a member to be, among other things, honest and candid within the constraints of client confidentiality. Service and the public trust should not be subordinated to personal gain and advantage. Integrity can accommodate the inadvertent error and the honest difference of opinion; it cannot accommodate deceit or subordination of principle.
Integrity is measured in terms of what is right and just. In the absence of specific rules, standards, or guidance, or in the face of conflicting opinions, a member should test decisions and deeds by asking: “Am I doing what a person of integrity would do? Have I retained my integrity?” Integrity requires a member to observe both the form and the spirit of technical and ethical standards; circumvention of those standards constitutes subordination of judgment.
Integrity also requires a member to observe the principles of objectivity and independence and of due care.
A member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities. A member in public practice should be independent in fact and appearance when providing auditing and other attestation services.
Objectivity is a state of mind, a quality that lends value to a member’s services. It is a distinguishing feature of the profession. The principle of objectivity imposes the obligation to be impartial, intellectually honest, and free of conflicts of interest. Independence precludes relationships that may appear to impair a member’s objectivity in rendering attestation services.
Members often serve multiple interests in many different capacities and must demonstrate their objectivity in varying circumstances. Members in public practice render attest, tax, and management advisory services. Other members prepare financial statements in the employment of others, perform internal auditing services, and serve in financial and management capacities in industry, education, and government. They also educate and train those who aspire to admission into the profession. Regardless of service or capacity, members should protect the integrity of their work, maintain objectivity, and avoid any subordination of their judgment.
For a member in public practice, the maintenance of objectivity and independence requires a continuing assessment of client relationships and public responsibility. Such a member who provides auditing and other attestation services should be independent in fact and appearance. In providing all other services, a member should maintain objectivity and avoid conflicts of interest.
Although members not in public practice cannot maintain the appearance of independence, they nevertheless have the responsibility to maintain objectivity in rendering professional services. Members employed by others to prepare financial statements or to perform auditing, tax, or consulting services, are charged with the same responsibility for objectivity as members in public practice and must be scrupulous in their application of generally accepted accounting principles and candid in all their dealings with members in public practice.
A member should observe the profession’s technical and ethical standards, strive continually to improve competence and the quality of services, and discharge professional responsibility to the best of the member’s ability.
The quest for excellence is the essence of due care. Due care requires a member to discharge professional responsibilities with competence and diligence. It imposes the obligation to perform professional services to the best of a member’s ability with concern for the best interest of those for whom the services are performed and consistent with the profession’s responsibility to the public.
Competence is derived from a synthesis of education and experience. It begins with a mastery of the common body of knowledge required for designation as a certified public accountant. The maintenance of competence requires a commitment to learning and professional improvement that must continue throughout a member’s professional life. It is a member’s individual responsibility. In all engagements and in all responsibilities, each member should undertake to achieve a level of competence that will assure that the quality of the member’s services meets the high level of professionalism required by these Principles.
Competence represents the attainment and maintenance of a level of understanding and knowledge that enables a member to render services with facility and acumen. It also establishes the limitations of a member’s capabilities by dictating that consultation or referral may be required when a professional engagement exceeds the personal competence of a member or a member’s firm. Each member is responsible for assessing his or her own competence – of evaluating whether education, experience, and judgment are adequate for the responsibility to be assumed.
Members should be diligent in discharging responsibilities to clients, employers, and the public. Diligence imposes the responsibility to render services promptly and carefully, to be thorough, and to observe applicable technical and ethical standards.
Due care requires a member to plan and supervise adequately any professional activity for which he or she is responsible.
A member in public practice should observe the Principles of the Code of Professional Conduct in determining the scope and nature of services to be provided.
The public interest aspect of certified public accountants’ services requires that such services be consistent with acceptable professional behavior for certified public accountants. Integrity requires that service and the public trust not be subordinated to personal gain and advantage. Objectivity and independence require that members be free from conflicts of interest in discharging professional responsibilities. Due care requires that services be provided with competence and diligence.
Each of these Principles should be considered by members in determining whether or not to provide specific services in individual circumstances. In some instances, they may represent an overall constraint on the nonaudit services that might be offered to a specific client. No hard-and-fast rules can be developed to help members reach these judgments, but they must be satisfied that they are meeting the spirit of the Principles in this regard.In order to accomplish this, members should:
The Bylaws of the Colorado Society of Certified Public Accountants require that members adhere to the Rules of the Code of Professional Conduct promulgated by the AICPA. Members must be prepared to justify departures from these rules.
The rules of conduct that follow apply to all professional services performed except (A) where the wording of the rule indicates otherwise and (B) that a member who is practicing outside the United States will not be subject to discipline for departing from any of the rules stated herein as long as the member’s conduct is in accord with the rules of the organized accounting profession in the country in which he or she is practicing. However, where a member’s name is associated with financial statements under circumstances that would entitle the reader to assume that United States Practices were followed, the member must comply with the requirements of Rules 202 and 203.
A member shall not knowingly permit a person, whom the member has the authority or capacity to control, to carry out on his or her behalf, either with or without compensation, acts which, if carried out by the member would place the member in violation of the Rules. Further, a member may be held responsible for the acts of all persons associated with him or her in the practice of public accounting whom the member has the authority or capacity to control.
A member or covered member may be considered to have his or her independence impaired, with respect to a client, as the result of the actions or relationships of certain persons or entities, as described in Rule 101 and its interpretations and rulings, whom the member or covered member does not have the authority or capacity to control. Therefore, nothing in this section should lead one to conclude that the member’s or covered member’s independence is not impaired solely because of his or her ability to control the actions or relationships of such persons or entities.
Attest Engagement. An attest engagement is an engagement that requires independence as defined in AICPA Professional Standards.
Attest Engagement Team. The attest engagement team consists of individuals participating in the attest engagement, including those who perform concurring and second partner reviews. The attest engagement team includes all employees and contractors retained by the firm who participate in the attest engagement, irrespective of their functional classification (for example, audit, tax, or management consulting services). The attest engagement team excludes specialists as discussed in SAS No. 73, using the work of a specialist, and individuals who perform only routine clerical functions, such as word processing and photocopying.
AICPA. The American Institute of Certified Public Accountants.
Client. A client is any person or entity, other than the member’s employer, that engages a member or a member’s firm to perform professional services or a person or entity with respect to which professional services are performed. For purposes of this paragraph, the term “employer” does not include: Entities engaged in the practice of public accounting; or federal, state, and local governments or component units thereof provided the member performing professional services with respect to those entities:
Close Relative. A close relative is a parent, sibling, or nondependent child.
Council. The Council of the American Institute of Certified Public Accountants.
Covered Member. A covered member is:
Financial Institution. A financial institution is considered to be an entity that, as part of its normal business operations, makes loans to the general public.
Financial Statements. A presentation of financial data, including accompanying notes, if any, intended to communicate an entity’s economic resources and/or obligations at a point in time or the changes therein for a period of time, in accordance with generally accepted accounting principles or a comprehensive basis of accounting other than other generally accepted accounting principles.
Incidental financial data to support recommendations to a client or in documents for which the reporting is governed by Statements on Standards for Attestation Engagements and tax returns and supporting schedules do not, for this purpose, constitute financial statements. The statement, affidavit, or signature of preparers required on tax returns neither constitutes an opinion on financial statements nor requires a disclaimer of such opinion.
Firm. A firm is a form of organization permitted by law or regulation whose characteristics conform to resolutions of the Board of Directors of the Colorado Society of CPAs that is engaged in the practice of public accounting. Except for purposes of applying Rule 101: Independence, the firm includes the individual partners thereof.
Holding Out. In general, any action initiated by a member that informs others of his or her status as a CPA or AICPA-accredited specialist constitutes holding out as a CPA. This would include, for example, any oral or written representation to another regarding CPA status, use of the CPA designation on business cards or letterhead, the display of a certificate evidencing a member’s CPA designation, or listing as a CPA in local telephone directories.
Immediate Family. Immediate family is a spouse, spousal equivalent, or dependent (whether or not related).
Individual in a position to influence the attest engagement. An individual in a position to influence the attest engagement is one who:
Institute. The American Institute of Certified Public Accountants.
Interpretations of rules of conduct. Pronouncements issued by the AICPA division of professional ethics to provide guidelines concerning the scope and application of the rules of conduct.
Joint Closely Held Investment. A joint closely held investment is an investment in an entity or property by the member and the client (or the client’s officers or directors, or any owner who has the ability to exercise significant influence over the client) that enables them to control (as defined by GAAP for consolidation purposes) the entity or property.
Key position. A key position is a position in which an individual:
For purposes of attest engagements not involving a client’s financial statements, a key position is one in which an individual is primarily responsible for, or able to influence, the subject matter of the attest engagement, as described above.
Loan. A loan is a financial transaction, the characteristics of which generally include, but are not limited to, an agreement that provides for repayment terms and a rate of interest. A loan includes, but is not limited to, a guarantee of a loan, a letter of credit, a line of credit, or a loan commitment.
Manager. A manager is a professional employee of the firm who has either of the following responsibilities:
Member. A Fellow member, Associate member, or Student Member of the Colorado Society of Certified Public Accountants.
Normal Lending Procedures, Terms, and Requirements. “Normal lending procedures, terms, and requirements” relating to a covered member’s loan from a financial institution are defined as lending procedures, terms, and requirements that are reasonably comparable with those relating to loans of a similar character committed to other borrowers during the period in which the loan to the covered member is committed. Accordingly, in making such comparison and in evaluating whether a loan was made under “normal lending procedures, terms, and requirements,” the covered member should consider all the circumstances under which the loan was granted, including:
Office. Office is a reasonably distinct subgroup within a firm, whether constituted by formal organization or informal practice, where personnel who make up the subgroup generally serve the same group of clients or work in the same categories of matters. Substance should govern the office classification. For example, the expected regular personnel interactions and assigned reporting channels of an individual may well be more important than an individual’s physical location.
Period of the Professional Engagement. The period of the professional engagement begins when a member either signs an initial engagement letter or other agreement to perform attest services or begins to perform an attest engagement for a client, whichever is earlier. The period lasts for the entire duration of the professional relationship (which could cover many periods) and ends with the formal or informal notification, either by the member or the client, of the termination of the professional relationship or by the issuance of a report, whichever is later. Accordingly, the period does not end with the issuance of a report and recommence with the beginning of the following year’s attest engagement.
Practice of Public Accounting. The practice of public accounting consists of the performance for a client, by a member or a member’s firm, while holding out as a CPA(s), of the professional services of accounting, tax, personal financial planning, litigation support services, and those professional services for which standards are promulgated by bodies designated by Council, such as Statements of Financial Accounting Standards, Statements on Auditing Standards, Statements on Standards for Accounting and Review Services, Statements on Standards for Consulting Services, Statements of Governmental Accounting Standards, and Statements on Standards for Attestation Engagements.
However, a member or a member’s firm, while holding out as a CPA(s), is not considered to be in the practice of public accounting if the member or the member’s firm does not perform, for any client, any of the professional services described in the preceding paragraph.
Professional Services. Professional services include all services performed by a member while holding out as a CPA.
Significant Influence. The term significant influence is as defined in Accounting Principles Board opinion No. 18 and its interpretations.
Society. The Colorado Society of Certified Public Accountants (COCPA).
A member in public practice shall be independent in the performance of professional services as required by standards promulgated by bodies designated by Council.
Interpretations under Rule 101 – Independence
In performing an attest engagement, a member should consult the rules of his or her state board of accountancy, the AICPA, the Public Company Accounting Oversight Board (PCAOB) if the member is required to be registered with the PCAOB, the U.S. Securities and Exchange Commission (SEC) if the member’s report will be filed with the SEC, the U.S. Department of Labor (DOL) if the member’s report will be filed with the DOL, the Government Accountability Office (GAO) if law, regulation, agreement, policy or contract requires the member’s report to be filed under GAO regulations, and any organization that issues or enforces standards of independence that would apply to the member’s engagement. Such organizations may have independence requirements or rulings that differ from (e.g. may be more restrictive than) those of the Society.
Interpretation of Rule 101
Independence shall be considered impaired if:
During the period of the professional engagement, a partner or professional employee of the firm, his or her immediate family, or any group of such persons acting together owned more than 5 percent of a client’s outstanding equity securities or other ownership interests.
During the period covered by the financial statements or during the period of the professional engagement, a firm or partner or professional employee of the firm was simultaneously associated with the client as a(n):
In the performance of any professional service, a member shall maintain objectivity and integrity, shall be free of conflicts of interest, and shall not knowingly misrepresent facts or subordinate his or her judgment to others.
A member shall comply with the following standards and with any interpretations thereof by bodies designated by Council:
A member who performs auditing, review, compilation, management consulting, tax, or other professional services shall comply with standards promulgated by bodies designated by Council.
A member shall not (1) express an opinion or state affirmatively that the financial statements or other financial data of any entity are presented in conformity with generally accepted accounting principles or (2) state that he or she is not aware of any material modifications that should be made to such statements or data in order for them to be in conformity with generally accepted accounting principles, if such statements or data contain any departure from an accounting principle promulgated by bodies designated by Council to establish such principles that has a material effect on the statements or data taken as a whole. If, however, the statements or data contain such a departure and the member can demonstrate that due to unusual circumstances the financial statements or data would otherwise have been misleading, the member can comply with the rule by describing the departure, its approximate effects, if practicable, and the reasons why compliance with the principle would result in a misleading statement.
A member in public practice shall not disclose any confidential client information without the specific consent of the client.
This rule shall not be construed (1) to relieve a member of his or her professional obligations under Rules 202 and 203, (2) to affect in any way the member’s obligation to comply with a validly issued and enforceable subpoena or summons, or to prohibit a member’s compliance with applicable laws and government regulations, (3) to prohibit review of a member’s professional practice under Society or AICPA or Board of Accountancy authorization, or (4) to preclude a member from initiating a complaint with, or responding to any inquiry made by, the professional ethics division or trial board of the AICPA or a duly constituted investigative or disciplinary body of the Society or Board of Accountancy.Members of any of the bodies identified in (4) above and members involved with professional practice reviews identified in (3) above shall not use to their own advantage or disclose any member’s confidential client information that comes to their attention in carrying out those activities. This prohibition shall not restrict members’ exchange of information in connection with the investigative or disciplinary proceedings described in (4) above or the professional practice reviews described in (3) above.
A member in public practice shall not:
Perform for a contingent fee any professional services for, or receive such a fee from, a client for whom the member or the member’s firm performs:
Except as stated in the next sentence, a contingent fee is a fee established for the performance of any service pursuant to an arrangement in which no fee will be charged unless a specified finding or result is obtained, or in which the amount of the fee is otherwise dependent upon the finding or result of such service. Solely for the purposes of this rule, fees are not regarded as being contingent if fixed by courts or other public authorities, or, in tax matters, if determined based on the results of judicial proceedings or the findings of governmental agencies.
A member’s fees may vary depending, for example, on the complexity of services rendered.
A member shall not commit an act discreditable to the profession.
A member in public practice shall not seek to obtain clients by advertising or other forms of solicitation in a manner that is false, misleading, or deceptive. Solicitation by the use of coercion, over-reaching, or harassing conduct is prohibited.
A member in public practice shall not for a commission recommend or refer to a client any product or service, or for a commission recommend or refer any product or service to be supplied by a client, or receive a commission, when the member or the member’s firm also performs for that client:
This prohibition applies during the period in which the member is engaged to perform any of the services listed above and the period covered by any historical financial statements involved in such listed services.
A member in public practice who is not prohibited by this rule from performing services for or receiving a commission and who is paid or expects to be paid a commission shall disclose that fact to any person or entity to whom the member recommends or refers a product or service to which the commission relates.
Any member who accepts a referral fee for recommending or referring any service of a CPA to any person or entity or who pays a referral fee to obtain a client shall disclose such acceptance or payment to the client.
A member may practice public accounting only in a form of organization permitted by law or regulation whose characteristics conform to resolutions of the Society Board of Directors.
A member shall not practice public accounting under a firm name that is misleading. Names of one or more past owners may be included in the firm name of a successor organization.
A firm may not designate itself as “Members of the Colorado Society of Certified Public Accountants” unless all of its CPA owners are members of the Society.