Responsibilities: Due Care
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.
care is the fifth principle of CPAs’ code of professional
conduct. Knowledge and diligence are common components of
due care. Performing professional engagements that require
expertise or time that a CPA does not possess violates the
principle of due care. How due care is practiced also differs
with the nature of the professional service.
care involves acting for someone else’s benefit or
to someone else’s specifications. CPAs frequently
perform tax and consulting services for specific clients
whose requirements or specifications can be known in great
detail. Knowledge of these requirements and the relevant
subject matter, along with diligence and thoroughness in
fulfilling the engagement, provides these clients the due
care required by the standard. The nature of due care can
vary considerably depending upon the degree to which the
service is specialized or personalized. The more personalized
the service, the harder it becomes to apply across-the-board
practices. Client satisfaction is the most meaningful assessment
of due care for such services.
contrast, because CPAs rarely know exactly who will be the
ultimate user of their audits, reviews, and attestations,
due care consists of exercising diligence in following the
appropriate professional standards. Knowledge of the appropriate
professional standards and diligence in following them are
the bases for ensuring due care for these core CPA services.
Because professional standards, not client specifications,
constitute the base for these services, it is extremely
important that engagement letters provide sufficient detail
about the services. It’s not necessary to detail all
the relevant standards in the engagement letter, but clients
should understand that, for certain engagements (usually
those requiring independence), due care involves satisfying
the professional standards rather than fulfilling the client’s
wishes. For these services, other knowledgeable and experienced
CPAs become the assessor of due care. Good quality-control
systems, second reviews, and aggressive professional education,
as well as effective peer reviews, are the current building
blocks for exercising due care for these services.
care can also be interpreted to mean the knowledge and diligence
to satisfy the expectations of a “reasonable”
person. CPAs encounter this aspect of their due care standard
whenever legal due diligence is called for. This usage of
“due” differs from the first two because it
refers to a minimum legal standard rather than a personal
or professional technical standard. This standard of due
care can also be superimposed on any service provided by
a CPA whenever the quality of the CPA’s service comes
into question in a legal dispute.
Due care requires that CPAs have adequate technical knowledge
to professionally perform the engagements they accept. The
rules section of the Code of Professional Conduct permits
CPAs to accept engagements without possessing completely
the necessary technical expertise as long as the expertise
is acquired before the engagement starts. Many failures
in due care recorded in ethics cases reflect CPAs’
reluctance to turn down engagements for new services and
their subsequent inability to obtain sufficient technical
expertise to perform them properly.
so much of the technical expertise required in CPA practice
arises from experience while supervised in a firm rather
than from formal education, it can be difficult for CPAs
to master new technical areas unless that expertise already
exists at their employer, especially as compared to other
professions. For example, doctors generally attend classes
at a certifying teaching hospital before offering a new
medical procedure. CPAs, on the other hand, generally do
not have access to such formal educational opportunities
in new service areas.
CPAs’ due care standard also requires
diligence in the performance of the service, making certain
there are adequate time and resources, as well as making
sufficient effort to perform the service to the client’s
satisfaction or to the level of professional technical standards.
Frequently, in a firm setting, diligence also addresses
adequately training, supervising, and evaluating staff members
and their work. CPAs have developed many practice aids,
notably checklists, to remind themselves of all the different
tasks required to complete engagements with due care.
due care standard lies behind the commitment of the profession
to continuing professional education and various quality-monitoring
programs, including peer review. Peer review provides incentives
and opportunities for CPAs to enhance the quality of their
work, ensure that they satisfy their ethical responsibility
to practice with due care, and demonstrate their quality
to the public.
H. Colson, PhD, CPA