AICPA Code of Professional Conduct

Effective December 15, 2014.

Updated for all Official Releases through April 23, 2015

Copyright 0 2015, American Institute of Certified Public Accountants, Inc. All Rights Reserved.

Table of Contents Preface: Applicable to All Members 1

0.100 Overview of the Code of Professional Conduct 1 .01 1 .02 1 .03 1 0.100.010 Principles and Rules of Conduct 1 0.100.020 Interpretations and Other Guidance 1

0.200 Structure and Application of the AICPA Code 2 0.200.010 Structure of the AICPA Code 2 0.200.020 Application of the AICPA Code 2 0.200.030 Citations 3 0.200.040 Transition Provisions 4 0.200.050 Drafting Conventions 4

0.300 Principles of Professional Conduct 4 0.300.010 Preamble 5 0.300.020 Responsibilities 5 0.300.030 The Public Interest 5 0.300.040 Integrity 5 0.300.050 Objectivity and Independence 6 0.300.060 Due Care 6 0.300.070 Scope and Nature of Services 7

0.400 Definitions 7 .01 8 .02 8 .03 8 .04 9 .05 9 .06 9 .07 9 .08 9 .09 9 .10 10 .11 10 .12 10 .13 10 .14 11 .15 11 .16 11 .17 11 .18 11 .19 11 .20 11 .21 11 .22 12 .23 12 .24 12 .25 12 .26 12 .27 12 .28 13 .29 13

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AICPA Code of Professional Conduct

.30 13

.31 13

.32 13

.33 13

.34 14

.35 14

.36 14

.37 14

.38 14

.39 15

.40 15

.41 15

.42 15

.43 15

.44 15

.45 15

.46 16

.47 16

.48 16

.49 16 0.500 Nonauthoritative Guidance 16

.01 16

.02 16

.03 17 0.600 New, Revised, and Pending Interpretations and Other Guidance 17

0.600.010 New and Revised Interpretations and Other Guidance 17 0.600.020 Pending Interpretations and Other Guidance 20

0.700 Deleted Interpretations and Other Guidance 22 .01 22

Part 1 26 1.000 Introduction 26

.01 26

.02 26

.03 26 1.000.010 Conceptual Framework for Members in Public Practice 26 1.000.020 Ethical Conflicts 32

1.100 Integrity and Objectivity 32 1.100.001 Integrity and Objectivity Rule 32 Interpretations Under the Integrity and Objectivity Rule 33

1.200 Independence 41 1.200.001 Independence Rule 41 Interpretations Under the Independence Rule 41

1.300 General Standards 105 1.300.001 General Standards Rule 105 Interpretations Under the General Standards Rule 105

1.310 Compliance With Standards 107 1.310.001 Compliance With Standards Rule 107 Interpretations Under the Compliance with Standards Rule 107

1.320 Accounting Principles 107 1.320.001 Accounting Principles Rule 107 Interpretations Under the Accounting Standards Rule 108

1.400 Acts Discreditable 110 1.400.001 Acts Discreditable Rule 110 Interpretations Under the Acts Discreditable Rule 110

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AICPA Code of Professional Conduct

1.500 Fees and Other Types of Remuneration 116 1.500.008 Unpaid Fees 116 1.510 Contingent Fees 116 1.520 Commissions and Referral Fees 119

1.600 Advertising and Other Forms of Solicitation 122 1.600.001 Advertising and Other Forms of Solicitation Rule 122 Interpretations Under the Advertising and Other Forms of Solicitation Rule 122

1.700 Confidential Information 123 1.700.001 Confidential Client Information Rule 123 Interpretations Under the Confidential Client Information Rule 124

1.800 Form of Organization and Name 127 1.800.001 Form of Organization and Name Rule 128 Interpretations Under the Form of Organization and Name Rule 128

Part 2 132 2.000 Introduction 132

.01 132

.02 132 2.000.010 Conceptual Framework for Members in Business 132 2.000.020 Ethical Conflicts 136

2.100 Integrity and Objectivity 137 2.100.001 Integrity and Objectivity Rule 137 Interpretations Under the Integrity and Objectivity Rule 137

2.300 General Standards 142 2.300.001 General Standards Rule 142 Interpretations Under the General Standards Rule 143

2.310 Compliance With Standards 144 2.310.001 Compliance With Standards Rule 144 Interpretations Under the Compliance with Standards Rule 144

2.320 Accounting Principles 144 2.320.001 Accounting Principles Rule 144 Interpretations Under the Accounting Principles Rule 145

2.400 Acts Discreditable 147 2.400.001 Acts Discreditable Rule 147 Interpretations Under the Acts Discreditable Rule 147

Part 3 151 3.000 Introduction 151

.01 151

.02 151 3.000.030 Applicability 151

3.400 Acts Discreditable 151 3.400.001 Acts Discreditable Rule 151 Interpretations Under the Acts Discreditable Rule 151

Appendix A 154 154

Appendix B 158 158

Appendix C 160 160

Appendix D 163 163

Preface: Applicable to All Members 0.100 Overview of the Code of Professional Conduct

.01 The AICPA Code of Professional Conduct (the code) begins with this preface, which applies to all members The term member, when used in part 1 of the code, applies to and means a member in public practice; when used in part 2 of the code, applies to and means a member in business; and when used in part 3 of the code, applies to and means all other members, such as those members who are retired or unemployed.

.02 A member may have multiple roles, such as a member in business and a member in public practice. In such circumstances, the member should consult all applicable parts of the code and apply the most restrictive provisions. [No prior reference: new content]

Effective Date

.03 Effective December 15, 2014.

0.100.010 Principles and Rules of Conduct

.01 The AICPA membership adopted the Code of Professional Conduct (the code) to provide guidance and rules to all members in the performance of their professional responsibilities. The code consists of principles and rules as well as interpretations and other guidance which are discussed in 0.100.020. The principles provide the framework for the rules that govern the performance of their professional responsibilities.

.02 The AICPA bylaws require that members adhere to the rules of the code. Compliance with the rules depends primarily on members' understanding and voluntary actions; secondarily on reinforcement by peers and public opinion; and ultimately on disciplinary proceedings, when necessary, against members who fail to comply with the rules. Members must be prepared to justify departures from these rules.

0.100.020 Interpretations and Other Guidance

.01 Interpretations of the rules of conduct are adopted after exposure to the membership, state societies, state boards, and other interested parties. The interpretations of the rules of conduct, "Definitions" [0.400], "Application of the AICPA Code" [0.200.020], and "Citations" [0.200.030], provide guidelines about the scope and application of the rules but are not intended to limit such scope or application. A member who departs from the interpretations shall have the burden of justifying such departure in any disciplinary hearing. Interpretations that existed before the adoption of the code on January 12, 1988, will remain in effect until further action is deemed necessary by the appropriate senior committee.

.02 A member should also consult the following, if applicable:

The ethical requirements of the member's state CPA society and authoritative regulatory bodies such as state board(s) of accountancy

The Securities and Exchange Commission (SEC)

The Public Company Accounting Oversight Board (PCAOB)

The Government Accountability Office (GAO)

The Department of Labor (DOL)

Federal, state and local taxing authorities

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Preface: Applicable to All Members

Any other body that regulates a member who performs professional services for an entity when the member or entity is subject to the rules and regulations of such regulatory body. [Prior reference: Introduction]

0.200 Structure and Application of the AICPA Code

0.200.010 Structure of the AICPA Code

.01 A variety of topics appear in parts 1-3 of the code. When applicable, topics are aligned with the relevant rule or rules of conduct. Topics may be further divided into subtopics, and some subtopics include one or more sections. Topics, subtopics, and sections interpret the rules of conduct (see "Interpretations and Other Guidance" [0.100.020]).

.02 Defined terms (see "Definitions" [0.400]) as well as the plurals and possessives thereof, are shown in italics throughout the code. When a defined term is used in the code but is not shown in italics, the definition in 0.400 should not be applied. [No prior reference: new content]

Effective Date

.03 Effective December 15, 2014.

0.200.020 Application of the AICPA Code

.01 The Code of Professional Conduct (the code) was originally adopted on January 12, 1988, and was periodically revised through June 1, 2014. On June 1, 2014, the AICPA issued a codification of the code's principles, rules, interpretations and rulings (revised code). The revised code will be effective December 15, 2014, excluding the Conceptual Framework sections. These sections, "Conceptual Framework for Members in Public Practice" [1.000.010] and "Conceptual Framework for Members in Business" [2.000.010], will be effective December 15, 2015. Members are permitted to implement the revised code prior to December 15, 2014, but a member may not implement the relevant Conceptual Framework prior to implementing the entire revised code. Revisions made subsequent to June 1, 2014, are identified in appendix C, the Revision History Table, which notes the month and year of the change, the effective date of the change, the purpose for the revision, and when possible, a link to the marked revision of the content that appeared in the Journal of Accountancy. If the interpretation or paragraph does not contain a specific effective date or a reference to the revision history table, then the content was effective prior to June 1, 2014. [No prior reference: new content.]

.02 When used in the preface of the code, the term member includes members, associate members, and affiliate members, as well as international associates of the AICPA.

.03 The rules of conduct apply to all professional services performed, except

a. when the wording of the rule indicates otherwise.

b. that a member who is practicing outside the United States will not be considered in violation of a particular rule for departing from any of the rules stated herein, as long as the member's conduct is in accordance with the rules of the organized accounting profession in the country in which he or she is practicing. However, when a member is associated with financial statements under circumstances that would lead the reader to assume that practices of the United States were followed, the member must comply with the "Compliance With Standards Rule" [1.310.001 for members in public practice and 2.310.001 for members in business] and the "Accounting Principles Rule" [1.320.001 for members in public practice and 2.320.001 for members in business].

c. that a member who is a member of a group engagement team (see the clarified Statement on Auditing Standards Special ConsiderationsAudits of Group Financial Statements [Including the Work of Component Auditors] [AICPA, Professional Standards, AU-C sec. 600]) will not be considered in

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Part 1 Members in Public Practice

b. Any other public company entity over which an indirect superior has direct responsibility has a financial relationship with an attest client during the period of the professional engagement that is material in relation to the other public company entity's financial statements.

c. Financial relationships of indirect superiors or other public company entities allow such persons or entities to exercise significant influence over the attest client during the period of the professional engagement. In making the test for significant influence, financial relationships of all indirect superiors and other public company entities should be aggregated.

d. Other public company entities or any of their employees are connected with an attest client of Newfirm as a promoter, an underwriter, a voting trustee, a director, or an officer during the period of the professional engagement or during the period covered by the financial statements.

.11 Indirect superiors and other public company entities may provide services to an attest client of Newfirm that would impair independence if performed by Newfirm, except as noted in paragraph .10d.

.12 When Newfirm and its partners and professional employees perform attest engagements for PublicCo or any of its subsidiaries or divisions, threats to compliance with the "Independence Rule" [1.200.001] would not be at an acceptable level and could not be reduced to an acceptable level through the application of safeguards. Accordingly, independence would be impaired.

.13 If an attest client of Newfirm holds an investment in PublicCo that is material to the attest client or that allows the attest client to exercise significant influence over PublicCo during the period of the professional engagement, threats to compliance with the "Independence Rule" [1.200.001] would not be at an acceptable level and could not be reduced to an acceptable level through the application of safeguards. Accordingly, independence would be impaired.

.14 When making referrals of services between Newfirm and any of the entities within PublicCo, a member should consider the provisions of the "Conflicts of Interest" interpretation [1.110.010] of the "Integrity and Objectivity Rule" [1.100.001] and the "Alternative Practice Structures" interpretation [1.810.050] of the "Form of Organization and Name Rule" [1.800.001]. [Prior reference: paragraph .16 of ET section 101]

1.220.030 Use of a Nonindependent CPA Firm on an Engagement

.01 If partners or professional employees from another firm that was not independent of an attest client participate on the attest engagement team, threats to compliance with the "Independence Rule" [1.200.001] would not be at an acceptable level and could not be reduced to an acceptable level through the application of safeguards. Accordingly, thefirm 's independence would be impaired.

.02 However, thefirm may use the work of such individuals in a manner similar to internal auditors, provided that thefirm complies with AU-C section 610, Using the Work of Internal Auditors (AICPA, Professional Standards). [Prior reference: paragraphs .142.143 of ET section 191]

1.224 Affiliates, Including Governmental Units

1.224.010 Client Affiliates

.01 Financial interests in, and other relationships with, affiliates of a financial statement attest client may create threats to a member's compliance with the "Independence Rule" [1.200.001].

.02 When a client is a financial statement attest client, members should apply the "Independence Rule" [1.200.001] and related interpretations applicable to the financial statement attest client to their affiliates, except in the following situations:

a. A covered member may have a loan to or from an individual who is an officer, a director, or a 10 percent or more owner of an affiliate of a financial statement attest client during the period of the professional engagement unless the covered member knows or has reason to believe that the individual is in such a position with the affiliate. If the covered member knows or has reason to

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Statement on Auditing Standards No. 128, Using the Work of Internal Auditors

Issue Date: February 2014

Effective Date: This Statement on Auditing Standards is effective for audits of financial statements for periods ending on or after December 15, 2014.

Product Number: ASASST128P (paperback); ASASST128E (eBook) (Or, go to htto://www.coa2biz.com and search for this product number.)

Executive Summary

As a result of its Clarity Project, the Auditing Standards Board (ASB) has issued Statement on Auditing Standards (SAS) No. 128, Using the Work of Internal Auditors, to

supersede SAS No. 65, The Auditor's Consideration of the Internal Audit Function in an Audit of Financial Statements (AICPA, Professional Standards, AU sec. 322 and AU-C sec. 610), and

amends

o SAS No. 122, Statements on Auditing Standards: Clarification and Recodification, section 315, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement (AICPA, Professional Standards, AU-C sec. 315);

o Various other sections in SAS No. 122 (AICPA, Professional Standards, AU-C secs. 200, 220, 230, 240, 260, 265, 300, 402, 500, 550, and 600); and

o Statement on Quality Control Standards No. 8, A Firm's System of Quality Control (Redrafted) (AICPA, Professional Standards, QC sec. 10).

SAS No. 128 addresses the external auditor's responsibilities if using the work of internal auditors. Using the work of internal auditors includes (a) using the work of the internal audit function in obtaining audit evidence and (b) using internal auditors to provide direct assistance under the direction, supervision, and review of the external auditor.

SAS No. 128 does not apply if the entity does not have an internal audit function. If the entity has an internal audit function, the requirements in SAS No. 128 relating to using the work of the internal audit function in obtaining audit evidence do not apply if

a. the responsibilities and activities of the function are not relevant to the audit, or

b. based on the external auditor's preliminary understanding of the function obtained as a result of procedures performed under AU-C section 315, the external auditor does not expect to use the work of the function in obtaining audit evidence.

Nothing in SAS No. 128 requires the external auditor to use the work of the internal audit function to modify the nature or timing, or reduce the extent, of audit procedures to be performed directly by the external auditor; it remains the external auditor's decision to establish the overall audit strategy. Furthermore, the requirements in SAS No. 128 relating to using internal auditors to provide direct assistance do not apply if the external auditor does not plan to use internal auditors to provide direct assistance.

Consistent with International Standard on Auditing (ISA) 610 (Revised 2013), Using the Work of Internal Auditors, SAS No. 128 introduces the concept of a systematic and disciplined approach, which is not included in SAS No. 65. Paragraph 13 of SAS No. 128 would require, among other things, as a prerequisite to being able to use the work of the internal audit function, that the external auditor evaluate the application by the internal audit function of a systematic and disciplined approach, including quality control. Paragraphs Al2-A14 of SAS No. 128 provide application guidance with regard to the evaluation of the application of a systematic and disciplined approach by the internal audit function. The ASB believes that relative to SAS No. 65, this requirement represents an additional and explicit evaluation that the external auditor is required to determine whether the work of internal auditors can be used in obtaining audit evidence.

Convergence

SAS No. 128 was developed using ISA 610 (Revised 2013) as a base. Substantive differences in objectives, definitions, or requirements between SAS No. 128 and ISA 610 (Revised 2013) are identified in the exhibit to SAS No. 128.

The ASB has made various changes to the language of the ISA in SAS No. 128 to use terms or phrases that are more commonly used in the United States and to tailor examples and guidance to be more appropriate to the U.S. environment. The ASB believes that such changes will not create differences between the application of ISA 610 (Revised 2013) and the application of SAS No. 128. Taking account of existing practice in the United States relating to use of internal auditors to provide direct assistance, the ASB made additional changes to the related ISA requirements and application material in SAS No. 128 (as described in more detail in the exhibit to SAS No. 128).