What Are the AICPA Acts Discreditable Rules?

The “Acts Discreditable Rule” is a component of the American Institute of Certified Public Accountants (AICPA) Code of Professional Conduct. It protects the public interest by ensuring members uphold the integrity and reputation of the certified public accountant (CPA) profession. The rule states that a member shall not commit an act discreditable to the profession.

This rule is general to encompass a wide variety of behaviors that could damage public trust. It applies to all members, whether in public practice, business, or retired. Interpretations of the rule cover actions ranging from professional negligence to personal choices that reflect poorly on a member’s character.

Prohibited Conduct in Professional Services

A primary focus of the Acts Discreditable Rule is conduct that occurs during the performance of professional services. A significant violation is negligence in the preparation of financial statements or records. This includes making materially false and misleading entries or failing to correct financial statements that are known to be false and misleading when the member has the authority to do so.

Members must adhere to standards set by governmental and regulatory bodies. Members performing services for entities under agencies like the Governmental Accountability Office (GAO) or the Public Company Accounting Oversight Board (PCAOB) must follow their specific standards. A failure to follow these mandated audit standards or procedures is considered an act discreditable to the profession.

The rule protects the integrity of the CPA credential. The AICPA prohibits the solicitation or knowing disclosure of Uniform CPA Examination questions and answers. In September 2023, this interpretation was expanded to also address cheating on continuing professional education and internal firm training, making it a discreditable act to engage in any false or misleading conduct related to one’s professional qualifications.

Improper use of the CPA credential is a discreditable act. Members must follow the laws and regulations of the state boards of accountancy where they practice regarding the use of the CPA designation. Using the credential in a way that is false, misleading, or deceptive, such as implying licensure in a jurisdiction where the member is not licensed, is a violation.

Violations in Client and Firm Management

The management of client relationships and firm operations is another area where discreditable acts can occur, particularly with the handling of client records. The AICPA rules mandate that a member must return “client-provided records” upon request. These are records belonging to the client that were provided to the CPA, and this obligation exists even if the client has not paid for the services.

While a CPA may withhold records they prepared for the client if fees for that specific work are outstanding, they cannot hold the client’s own documents. The rules require that records be returned as soon as practicable, with a common timeframe being no later than 45 days after the request is made.

A breach of client confidentiality is a discreditable act. The rules prohibit a member from disclosing any confidential client information without obtaining the client’s specific consent. Limited exceptions exist, such as responding to a validly issued subpoena or summons, or participating in an authorized peer review program.

The rule forbids any false, misleading, or deceptive acts in advertising or other forms of solicitation. This includes:

• Making claims that create false expectations of favorable results
• Implying an ability to influence a court or regulatory agency
• Misrepresenting one’s professional qualifications or experience
• Guaranteeing a specific outcome in an audit

Personal Conduct Deemed Discreditable

The Acts Discreditable Rule extends into a member’s personal life, addressing conduct that could harm the profession’s reputation. Engaging in discrimination or harassment in employment practices is a violation. If a court or administrative agency makes a final determination that a member has violated antidiscrimination laws, including those related to sexual harassment, it is presumed to be a discreditable act.

A member’s personal compliance with tax laws is also important. Failing to file personal tax returns or the tax returns for their firm in a timely manner is a discreditable act. The same applies to the failure to timely remit taxes collected on behalf of others, such as payroll taxes.

The rule covers a range of personal behaviors that could bring the profession into disrepute. Actions that have legal consequences or demonstrate a lack of integrity can fall under the rule. For instance, certain criminal convictions, particularly those related to financial matters, can be deemed discreditable.

Consequences of a Violation

Violating the Acts Discreditable Rule can lead to significant professional consequences. The AICPA has the authority to impose disciplinary actions on its members. These sanctions can range from a formal admonishment to suspension or even permanent expulsion from the organization. The findings of these disciplinary proceedings are often published, creating a public record.

The AICPA’s authority is limited to a CPA’s membership in the professional organization, as the actual license to practice is granted by individual state boards of accountancy. A consequence of an AICPA disciplinary finding is the referral of the matter to the relevant state board where the member is licensed.

State boards of accountancy have their own investigative and disciplinary processes. Upon receiving a report from the AICPA, a state board can initiate its own case. Potential sanctions from a state board can include substantial monetary penalties, mandatory continuing education, or the suspension or permanent revocation of the member’s license to practice.