Application of the Conceptual Framework for Members in Business and Ethical Conflicts
260.5 A1 In the absence of an interpretation of the “General Standards Rule” and “Professional Competence and Due Care Principle” that addresses a particular relationship or circumstance, a member should apply the “Conceptual Framework for Members in Business” (200.3 – 200.4).
260.5 A2 A member would be considered in violation of the “General Standards Rule” and “Professional Competence and Due Care Principle” if the member cannot demonstrate that safeguards were applied that eliminated or reduced significant threats to an acceptable level.
260.5 A3 A member should consider the guidance in the “Ethical Conflicts” interpretation (210.1) when addressing ethical conflicts that may arise when the member encounters obstacles to following an appropriate course of action. Such obstacles may be due to internal or external pressures or to conflicts in applying relevant professional and legal standards, or both.
Professional competence and due care
260.6 A4 Competence, in this context, means that the member or member’s staff possesses the appropriate technical qualifications to perform professional services and, as required, supervises and evaluates the quality of work performed. Competence encompasses knowledge of the profession’s standards, the techniques and technical subject matter involved, and the ability to exercise sound judgment in applying such knowledge in the performance of professional services.
260.6 A5 A member’s agreement to perform professional services implies that the member has the necessary competence to complete those services according to professional standards and to apply the member’s knowledge and skill with reasonable care and diligence. However, the member does not assume a responsibility for infallibility of knowledge or judgment.
260.6 A6 The member may have the knowledge required to complete the services in accordance with professional standards prior to performance. A normal part of providing professional services involves performing additional research or consulting with others to gain sufficient competence.
260.6 A7 Threats to the member’s compliance with the “General Standards Rule” and “Professional Competence and Due Care Principle” may exist if the member is performing professional services and the member has:
- Insufficient time for properly performing or completing the relevant duties;
- Incomplete, restricted or otherwise inadequate information for performing the duties properly;
- Insufficient experience, training or education, or both; or
- Inadequate resources for the proper performance of the duties.
260.6 A8 The significance of the threats will depend on factors such as the extent to which the member is working with others, relative seniority in the business, and the level of supervision and review applied to the work. The member should evaluate the significance of any threats and apply safeguards, when necessary, to eliminate or reduce the threats to an acceptable level. Examples of such safeguards include:
- Performing additional research or obtaining additional advice or training.
- Ensuring that there is adequate time available for performing the relevant duties.
- Obtaining assistance from someone with the necessary expertise.
- Consulting, where appropriate, with:
- Superiors within the employing organisation;
- Independent experts; or
- A relevant professional body.
260.6 A9 If the member determines that the threats are so significant that no safeguards could eliminate or reduce the threats to an acceptable level, and therefore the member is unable to gain sufficient competence, the member should suggest the involvement of a competent person to perform the needed professional service, either independently or as an associate.
Submission of financial statements
R260.7 When a member is a stockholder, a partner, a director, an officer, or an employee of an entity and, in this capacity, prepares or submits the entity’s financial statements to third parties, the member should clearly communicate, preferably in writing, the member’s relationship to the entity and should not imply that the member is independent of the entity. In addition, if the communication states affirmatively that the financial statements are presented in conformity with the applicable financial reporting framework, the member should comply with the “Accounting Principles Rule” and the “Professional Competence and Due Care Principle”.
260.7 A1 AICPA members should refer to the “Use of CPA Credential” interpretation (370.26) for additional guidance.