Professional Ethics and the CPA in Industry

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APRIL 2006 - In 2003, he Society’s Board of Directors created the Quality Enhancement Policy Committee (QEPC) to ensure that peer review and ethics are meeting the needs of the accounting profession and the public that it serves. Now that the board has approved the final draft of the QEPC’s white paper on peer review (it was published in the March CPA Journal)—and implementation of the white paper’s concepts is being discussed—the committee has begun to consider the next item on its agenda: ethics.

The QEPC has already gathered some interesting historical information on the profession’s ethics process. For example, did you know the profession’s original ethical standards were written at a time when CPAs working in private industry were few and far between?

How times have changed! These days, CPAs are working in public accounting firms, major corporations, schools, government agencies … almost everywhere. CPAs in industry now constitute approximately one third of our membership and half of the AICPA’s. This professional evolution led the QEPC to the following question: Do the profession’s ethical standards place enough emphasis on the issues currently faced by members in industry?

Different Role, Different Dilemmas

Some of the ethical dilemmas faced by CPAs in industry are very different from those faced by CPAs in public accounting firms. For example, let’s say you are a CPA working at a publicly traded corporation and, after seeing disappointing financial results, your boss, the CEO, instructs you to book a transaction differently so the company meets income expectations. What do you do? If complying with the request would result in the fraudulent recording of a transaction, you should disclose the situation to your audit committee and, hopefully, your boss would be fired. But what if the CEO asked you to do something “on the edge,” but not clearly illegal or in violation of professional standards? Under what circumstances would complying with your boss’ instruction be unethical?

If a public accounting firm’s client were to consider doing something unethical, the public accounting firm should, of course, counsel against that course of action and then, if the counsel is rejected, resign from the engagement. But would you, as a CPA in industry, be expected to resign in the earlier example? What about your salary, your career, and your family? You could consider going public with your situation, and whistleblower laws protect employees to some degree. But doesn’t a CPA in industry also have a duty of confidentiality to his or her employer?

The major difference between a CPA working in a public accounting firm versus one in private industry is how each defines the “client.” While public accounting firms work for, and are paid by, the company that hired them for an independent audit, their ultimate client is always the public. The public accounting firm’s purpose is crystal clear: to protect the public interest. It is their raison d’etre. But who is the ultimate client for a CPA working in private industry? The CPA’s employer, or the public? The profession’s ethical literature provides little guidance.

Share Your Input

Because the NYSSCPA is just beginning to scrutinize the profession’s ethics process and gather information, I’d like to ask our members and readers the same question the QEPC asked: Do you think the profession’s national and state ethical standards are sufficiently broad to cover CPAs working in private industry? Let me know your thoughts at Your input will help guide the QEPC and the Society as we seek to explore what, if any, changes should be made.

Louis Grumet
Publisher, The CPA Journal
Executive Director, NYSSCPA




















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