What Is the AICPA Acts Discreditable Rule?
Explore the AICPA's core ethical standard obligating members to uphold the accounting profession's integrity in both their professional and personal conduct.
The Acts Discreditable Rule is a component of the American Institute of Certified Public Accountants (AICPA) Code of Professional Conduct that requires members to avoid actions that could damage the accounting profession’s reputation. The profession’s value depends on public trust, and this rule helps maintain that confidence. Found in section 1.400.001 of the AICPA Code, the rule states that “a member shall not commit an act discreditable to the profession.” The intentionally broad language applies to all AICPA members, regardless of their role, including those in public practice, industry, government, or education.
Categories of Discreditable Acts
The AICPA provides specific interpretations to clarify what conduct falls under this rule. These interpretations create enforceable standards for conduct that occurs during professional engagements and in a member’s personal life.
Discrimination and Harassment
The rule prohibits discrimination or harassment in employment practices. If a court or administrative agency, like the Equal Employment Opportunity Commission, determines a member has violated anti-discrimination or anti-harassment laws, it is considered a discreditable act. This includes violations related to sexual harassment, age, race, or other protected characteristics.
Failure in Governmental Audits
Members performing audits under governmental standards must follow those requirements. For instance, failing to follow Government Auditing Standards (GAS), also known as the “Yellow Book,” during an audit of a government entity is a discreditable act.
Negligence and Deception
Negligence in preparing financial statements or records is a violation. This includes making materially false journal entries or failing to correct financial statements that are known to be erroneous when the member has the authority to do so. The rule also covers false or misleading acts in marketing a CPA’s services or qualifications, as any claims about experience must be truthful.
CPA Examination and Credentials
The rule protects the integrity of the CPA credential. The AICPA prohibits soliciting or knowingly disclosing Uniform CPA Examination questions and answers. This extends to other deceptive acts related to professional qualifications, such as cheating on continuing professional education courses or falsifying attendance.
Tax Compliance Failures
A member’s personal and firm-related tax obligations are also governed by the rule. Failing to file a personal or firm tax return on time is a discreditable act. Similarly, failing to remit payroll taxes or other funds collected on behalf of others is a violation.
Client Information and Records
A member’s handling of client information is regulated. Disclosing confidential client information without the client’s consent is a discreditable act, unless there is a legal or professional duty to do so. A CPA must return all client-provided records upon request, even if the client has outstanding fees. While the accountant can retain their own work product, withholding the client’s original documents over a fee dispute is prohibited.
Rule Application Beyond Professional Services
The Acts Discreditable Rule extends beyond the office and into a member’s personal life, as certain actions can harm the profession’s reputation. This is most clearly seen in cases involving legal infractions. A conviction for a felony, particularly one involving fraud or theft, is likely to be considered a discreditable act. The specific crime does not need to be related to accounting, as the act itself reflects on the judgment and integrity expected of a CPA.
Personal financial irresponsibility can also trigger a violation if it becomes public and reflects on the member’s character. While personal bankruptcy is not automatically a discreditable act, actions leading to it, such as financial fraud, could fall under the rule. The consideration is whether the personal behavior would cause a reasonable person to question the CPA’s integrity.
Consequences of a Violation
If a member commits a discreditable act, the AICPA’s Professional Ethics Executive Committee (PEEC) investigates and may impose disciplinary actions. Sanctions depend on the misconduct’s severity and can range from a private admonishment to suspension or permanent expulsion from the AICPA. The disciplinary process does not end with the AICPA, as it shares ethics findings with state boards of accountancy.
State boards have their own authority to regulate the profession and can initiate separate investigations. Penalties from a state board can include formal reprimands, fines, mandatory ethics training, suspension of the CPA’s license, or permanent revocation of the license to practice.