What Is the Due Care Principle in the AICPA Code?

The American Institute of Certified Public Accountants (AICPA) establishes the ethical foundation for the accounting profession through its Code of Professional Conduct. This code is not merely a set of rules but a comprehensive framework built upon several principles that guide a CPA’s responsibilities and professional life. These principles ensure that accountants serve the public interest and maintain the high standing of the profession.

Defining the Due Care Principle

The Principle of Due Care, articulated in the AICPA Code of Professional Conduct under ET Section 0.300.060, mandates that members carry out their professional duties with competence and diligence. This is an obligation to adhere to the profession’s technical and ethical standards and act in the best interest of clients, employers, and the public. Due care requires CPAs to perform services to the best of their ability, which involves a synthesis of education and experience. The principle is expressed through two interconnected requirements: professional competence and professional diligence.

The Competence Requirement

Professional competence is the foundational knowledge and technical skill required to perform professional services. This begins with education and the successful completion of the Uniform CPA Examination. However, the principle of due care demands a lifelong commitment to learning and professional improvement to maintain this competence.

This ongoing obligation is primarily fulfilled through Continuing Professional Education (CPE). Most jurisdictions require CPAs to complete around 40 hours annually or 120 hours over a three-year period, covering technical subjects, accounting updates, and ethics. Competence also means recognizing the boundaries of one’s own expertise and determining when an engagement necessitates consultation with or referral to another professional.

The Diligence Requirement

While competence relates to possessing the necessary skills, diligence is about the manner in which those skills are applied. Diligence is the practical and conscientious execution of professional responsibilities. It requires a CPA to render services promptly and carefully, ensuring that all actions are thorough and align with applicable technical and ethical standards.

A key component of diligence is the requirement to adequately plan and supervise any professional activity. For any engagement, a diligent CPA must create a well-thought-out plan, supervise the work of any staff involved, and review the results to ensure accuracy and completeness.

Application Across Professional Engagements

Competence and diligence are applied daily across the diverse range of services a CPA provides. In a financial statement audit, due care is demonstrated when an auditor competently applies Generally Accepted Auditing Standards (GAAS). This involves diligently planning the audit, assessing risks of material misstatement, gathering sufficient appropriate audit evidence to form an opinion, and exercising professional skepticism.

In the context of tax services, a CPA exercises due care by competently researching and applying complex tax laws and regulations to a client’s specific financial situation. Diligence is shown by carefully gathering all relevant financial information from the client, ensuring the tax return is complete and accurate, and meeting all filing deadlines. This includes advising clients on tax planning strategies that are compliant with the law.

When providing consulting or advisory services, due care requires a CPA to possess a competent understanding of the client’s business and the specific problem they are trying to solve. The CPA must diligently gather and analyze sufficient relevant data before offering a recommendation. For example, before advising on a new accounting system, the CPA would assess the company’s operational needs and research various software options to ensure the recommendation is well-founded.