Code_of_Ethics

Code of Ethics in Accounting Shelly Crow May 18, 2009 BUS/421 Maria Wood, J.D. The code of ethics in the business world ensures proper procedures will be followed. The business world has different guidelines that aide different business’s in following the code of ethics. Accountants follow a professional and business code of ethics to ensure all work being performed is ethical for the company being represented. The state of Virginia has in place a Virginia Society of Certified Public Accountants (VSCPA) to aide accountants in the pursuit of being ethical. This paper will explore VSCPA, the Sarbanes-Oxley Act, and other Virginia related information that helps accountants in Virginia stay ethical. The state of Virginia conducts the accountant-client privilege similar to an attorney-client privilege. The major difference is that the account-client privilege is restricted to tax advice. The other information that an accountant may have for a client cannot be with held in a courtroom. The accountant also is obligated to disclose any information about tax evasion a client might be performing. “A federally authorized tax practitioner includes an attorney, a certified public accountant, an enrolled agent or an enrolled actuary.  The new accountant-client privilege only applies to tax advice. It does not apply with respect to the preparation of tax returns, general business consultations or even to personal financial planning advice. In addition, the advice must be treated as confidential by both the accountant and the client. If it is divulged to others then it is clearly not confidential” (Jacobs, ¶ 8). In regards to having accountant-client privilege, the best way to keep anything private is to make sure the information is not discussed with anyone but the accountant. The explanation of an accountants work product is the tax return, financial statements, and review and audit report. The state of Virginia’s Board of Accountancy holds the right to review any of the work products done by a CPA of Virginia. The review process is to ensure that the accountant is following the ethical code of conduct for the state of Virginia. There can be consequences for not abiding to the code of conduct for the accountant. The state of Virginia offers the Virginia Society of Certified Public Accountants (VSCPA) as a membership for CPA’s of Virginia. “The VSCPA’s mission is “to enhance the success of CPAs.” Success for all CPAs can best be achieved when the environment in which the CPA operates is guided by a set of rules that is well defined and understood” (Cochran, March 1, 2008, ¶ 2). The VSCPA is an upstanding group that works to ensure all members adhere to the code of professional conduct, which can be difficult due to following the code is voluntary. “In the Commonwealth of Virginia, there are three regulatory and/or professional bodies that oversee the professional conduct of CPAs: the Virginia Board of Accountancy (BOA), the American Institute of CPAs (AICPA) and the VSCPA” (Cochran, March 1, 2008, ¶ 8). These organizations work together to ensure those involved in the programs follow the professional code of conduct. When an accountant is suspected of being unethical by a complaint filed against the account an investigation is started. The investigation is started when an accountant is thought to have violated an ethical procedure. “Certain ethical violations allow for automatic disciplinary action without a hearing or investigation. Membership will be suspended or terminated for any member who: • Is convicted of a crime punishable by imprisonment for more than one year • Willfully fails to file his or her own income tax return • Willfully prepares and files a false or fraudulent income tax return for a client • Has his or her license to practice as a CPA suspended by the BOA as a result of a disciplinary action • Is suspended from practicing before the Securities and Exchange Commission, the PCAOB or the Internal Revenue Service Office of Professional Responsibility Suspension or termination of membership will be published, thus alerting other regulatory agencies and interested parties of the action” (Cochran, March 1, 2008, ¶ 15).  Depending on the outcome of the investigation the accountant could be facing criminal charges and loss of the chance to be an accountant any longer in the state of Virginia. The accounting profession has been altered due to the enacting of the Sarbanes-Oxley Act (SOA) of 2002. The accountants of Virginia have been adjusting to the new procedures with a new and fresh outlook on the future of accounting. Due to several corporate accounting scandals, American lawmakers passed the Sarbanes-Oxley Act (SOA) of 2002, which imposed new rules regarding a company's financial integrity. The law affects US companies and any company doing business in the United States that has to file Securities and Exchange Commission (SEC) reports. The Sarbanes-Oxley Act significantly increased the legal liability of accountants. Accountants now take extra time and effort to ensure the work product is done correctly. A new federal regulatory agency, the Public Company Accounting Oversight Board was created to oversee auditors’ work, with authority to conduct inspections, create new standards and punish violators. Auditors’ civil and criminal liabilities were increased, and additional record-keeping burdens imposed. Audits of public companies became riskier for accountants but also more profitable, meaning a greater amount of work and risk involved. The Sarbanes-Oxley Act has made accountants think about not outsourcing the bulk of the work product. The hesitation in seeking the outsourcing is due the accountants will still be held liable for all work performed. The state of Virginia is working toward ensuring the professional code of conduct is followed by the lonely supervisor, company accountant, and business owner. The business code of ethics is based on each business conducting itself in a legal manner. The idea of conducting business illegally might be compelling, but who would jeopardize their business venture just to end up in jail. References: Cochran, CPA, Ph.D., R.J. (March 1, 2008) Decoding the VSCPA ethics process. Retrieved on May 14, 2009, from http://www.vscpa.com/Resources/Career_Development/career03010803.aspx Jacobs, CPA, V.K., (N.A.) Limits on client confidentiality and the accountant-client privilege. Retrieved on May 8, 2009, from http://www.rpifs.com/vkjcpa/confidentiality.htm