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Section 270: Acts discreditable / Professional behaviour / Confidentiality

Introduction

270.1           Members are required to comply with the Acts Discreditable Rule (AICPA) and the fundamental principles of Professional Behaviour and Confidentiality (CIMA), and apply the conceptual framework set out in Section 200 to identify, evaluate and address threats.

Requirements and application material

General

Acts Discreditable Rule (AICPA)

R270.2         A member shall not commit an act discreditable to the profession.

Professional Behaviour Principle (CIMA)

R270.3         A member shall comply with the principle of professional behaviour, which requires a member to comply with relevant laws and regulations and avoid any conduct that the member knows or should know might discredit the profession. A member shall not knowingly engage in any business, occupation or activity that impairs or might impair the integrity, objectivity or good reputation of the profession, and as a result would be incompatible with the fundamental principles.

Confidentiality Principle (CIMA)

R270.4         A member shall comply with the principle of confidentiality, which requires a member to respect the confidentiality of information acquired as a result of professional and business relationships. A member shall:

(a)   Be alert to the possibility of inadvertent disclosure, including in a social environment, and particularly to a close business associate or an immediate or a close family relative;

(b)  Maintain confidentiality of information within the firm or employing organisation;

(c)   Maintain confidentiality of information disclosed by a prospective client or employing organisation;

(d)  Not disclose confidential information acquired as a result of professional and business relationships outside the firm or employing organisation without proper and specific authority, unless there is a legal or professional duty or right to disclose;

(e)   Not use confidential information acquired as a result of professional and business relationships for the personal advantage of the accountant or for the advantage of a third party;

(f)    Not use or disclose any confidential information, either acquired or received as a result of a professional or business relationship, after that relationship has ended; and

(g)  Take reasonable steps to ensure that personnel under the accountant’s control, and individuals from whom advice and assistance are obtained, respect the accountant’s duty of confidentiality.

Interpretations under the Acts Discreditable Rule and Professional Behaviour and Confidentiality Principles

Application of the conceptual framework for members in business and ethical conflicts

270.5 A1      In the absence of an interpretation of the “Acts Discreditable Rule” and the Professional Behaviour and Confidentiality principles that addresses a particular relationship or circumstance, a member should apply the “Conceptual Framework for Members in Business” (200.3 – 200.4).

270.5 A2      A member would be considered in violation of the “Acts Discreditable Rule” and the Professional Behaviour and Confidentiality principles if the member cannot demonstrate that safeguards were applied that eliminated or reduced significant threats to an acceptable level.

270.5 A3      A member should consider the guidance in the “Ethical Conflicts” interpretation (310.1) when addressing ethical conflicts that may arise when the member encounters obstacles to follow an appropriate course of action. Such obstacles may be due to internal or external pressures or to conflicts in applying relevant professional standards or legal standards, or both.

Discrimination and harassment in employment practices

270.6 A1      A member would be presumed to have committed an act discreditable to the profession, in violation of the “Acts Discreditable Rule” and the “Professional Behaviour Principle” if a final determination, no longer subject to appeal, is made by a court or an administrative agency of competent jurisdiction that a member has violated any antidiscrimination laws of the country, state, or municipality, including those related to sexual and other forms of harassment.

Solicitation or disclosure of CPA/CIMA examination questions and answers

270.7 A1      A member who solicits or knowingly discloses the Uniform CPA Examination or the CIMA Examination question(s) or answer(s), or both, without the AICPA’s or CIMA’s respective written authorisation shall be considered to have committed an act discreditable to the profession, in violation of the “Acts Discreditable Rule” and the “Professional Behaviour Principle”.

Failure to file a tax return or pay a tax liability

270.8 A1      A member who fails to comply with applicable federal, state, or local laws or regulations regarding:

(a)   The timely filing of the member’s personal tax returns or tax returns for the member’s employer that the member has the authority to timely file; or

(b)   The timely remittance of all payroll and other taxes collected on behalf of others

may be considered to have committed an act discreditable to the profession, in violation of the “Acts Discreditable Rule” and the “Professional Behaviour Principle”.

Negligence in the preparation of financial statements or records

270.9 A1      A member would be considered in violation of the “Acts Discreditable Rule” and the “Professional Behaviour Principle” if the member, by virtue of their negligence, does any of the following:

(a)   Makes, or permits or directs another to make, materially false and misleading entries in the financial statements or records of an entity

(b)   Fails to correct an entity’s financial statements that are materially false and misleading when the member has the authority to record an entry

(c)   Signs, or permits or directs another to sign, a document containing materially false and misleading information

Governmental bodies, commissions, or other regulatory agencies

270.10         Many governmental bodies, commissions, or other regulatory agencies have established requirements, such as standards, guides, rules, and regulations that members are required to follow in the preparation of financial statements or related information.

R270.11       If a member prepares financial statements or related information (for example, management’s discussion and analysis) for purposes of reporting to such bodies, commissions, or regulatory agencies, the member shall follow the requirements of such organisations in addition to the applicable financial reporting framework.

270.11 A1    A member’s material departure from such requirements would be considered a violation of the “Acts Discreditable Rule” and the “Professional Behaviour Principle” unless the member discloses in the financial statements or related information that such requirements were not followed and the applicable reasons.

Indemnification and limitation of liability provisions

270.12         Certain governmental bodies, commissions, or other regulatory agencies (collectively, regulators) have established requirements through laws, regulations, or published interpretations that

(a)   Prohibit entities subject to their regulation (regulated entity) from including certain types of indemnification and limitation of liability provisions in agreements for the performance of audit or other attest or assurance services on behalf of the employing organisation that are required by such regulators; or

(b)   Provide that the existence of such provisions disqualifies a member from rendering such services to these entities.

R270.13       If a member enters into, or directs or knowingly permits another individual to enter into, a contract for the performance of audit or other attest or assurance services that are subject to the requirements of these regulators, the member should not include, or knowingly permit or direct another individual to include, an indemnification or limitation of liability provision that would cause the regulated entity or a member to be in violation of such requirements or disqualify a member from providing such services to the regulated entity.

270.13 A1    A member who enters into, or directs or knowingly permits another individual to enter into, such an agreement for the performance of audit or other attest services would be considered in violation of the “Acts Discreditable Rule” and the “Professional Behaviour Principle”.

Confidential information obtained from employment or volunteer activities

R270.14       A member shall maintain the confidentiality of their employer’s confidential information and should not use or disclose any confidential employer information obtained as a result of an employment relationship, such as discussions with the employer’s vendors, customers, or lenders (for example, any confidential information pertaining to a current or previous employer, subsidiary, affiliate, or parent thereof, as well as any entities for which the member is working in a volunteer capacity).

270.14 A1    For purposes of this interpretation, confidential employer information is any proprietary information pertaining to the employer or any organisation for whom the member may work in a volunteer capacity that is not known to be available to the public and is obtained as a result of such relationships.

270.14 A2    A member should be alert to the possibility of inadvertent disclosure, particularly to a close business associate or close relative or immediate family relative. The member should also take reasonable steps to ensure that staff under their control or others within the employing organisation and persons from whom advice and assistance are obtained are aware of the confidential nature of the information.

270.14 A3    When a member changes employment, a member should not use confidential employer information acquired as a result of a prior employment relationship to their personal advantage or the advantage of a third party, such as a current or prospective employer. The requirement to maintain the confidentiality of an employer’s confidential information continues even after the end of the relationship between a member and the employer. However, the member is entitled to use experience and expertise gained through prior employment relationships.

270.14 A4    A member would be considered in violation of the “Acts Discreditable Rule” and “Confidentiality Principle” if the member discloses or uses any confidential employer information acquired as a result of employment or volunteer relationships without the proper authority or specific consent of the employer or organisation for whom the member may work in a volunteer capacity, unless there is a legal or professional responsibility to use or disclose such information.

270.14 A5    The following are examples of situations in which members are permitted or may be required to disclose confidential employer information or when such disclosure may be appropriate:

(a)   Disclosure is permitted by law and authorised by the employer.

(b)   Disclosure is required by law, for example, to

  • Comply with a validly issued and enforceable subpoena or summons or
  • Inform the appropriate public authorities of violations of law that have been discovered.

(c)   There is a professional responsibility or right to disclose information, when not prohibited by law, to

  • Initiate a complaint with, or respond to any inquiry made by, the AICPA Professional Ethics Division or trial board of the AICPA or a duly constituted investigative or disciplinary body of a state CPA society, board of accountancy, or other regulatory body (AICPA) ;
  • Initiate a complaint with, or respond to any inquiry made by, the CIMA Professional Conduct Department or a duly constituted investigative or disciplinary body of CIMA, or other regulatory body (CIMA);
  • Protect the member’s professional interests in legal proceedings;
  • Comply with professional standards (for example, technical standards) and other ethics requirements; or
  • Report potential concerns regarding questionable accounting, auditing, or other matters to the employer’s confidential complaint hotline or those charged with governance.

(d)   Disclosure is permitted on behalf of the employer to

  • Obtain financing with lenders;
  • Communicate with vendors and customers; or
  • Communicate with the employer’s external accountant, attorneys, regulators, and other business professionals.

270.14 A6    In deciding whether to disclose confidential employer information relevant factors to consider include the following:

(a)   Whether all the relevant information is known and substantiated to the extent that it is practicable. When the situation involves unsubstantiated facts, incomplete information, or unsubstantiated conclusions, the member should use professional judgment in determining the type of disclosure to be made, if any.

(b)   Whether the parties to whom the communication may be addressed are appropriate recipients.

270.14 A7    A member may wish to consult with legal counsel prior to disclosing, or determining whether to disclose, confidential employer information.

270.14 A8    Refer to the “Subordination of Judgment” interpretation (240.11) for additional guidance.

False, misleading, or deceptive acts in promoting or marketing professional services

R270.15       A member would be in violation of the “Acts Discreditable Rule” and the “Professional Behaviour Principle” if the member promotes or markets the member’s abilities to provide professional services or makes claims about the member’s experience or qualifications in a manner that is false, misleading, or deceptive.

270.15 A1    Promotional efforts would be false, misleading, or deceptive if they contain any claim or representation that would likely cause a reasonable person to be misled or deceived. This includes any representation about CPA licensure, CGMA credential or any other professional certification or accreditation that is not in compliance with the requirements of the relevant licensing authority or designating body.

Use of the CPA credential (AICPA)

270.16 A1    A member should refer to applicable state accountancy laws and board of accountancy rules and regulations for guidance regarding the use of the CPA credential.

270.16 A2    A member who fails to follow the accountancy laws, rules, and regulations on use of the CPA credential in any of the jurisdictions in which the CPA practices would be considered to have used the CPA credential in a manner that is false, misleading, or deceptive and in violation of the “Acts Discreditable Rule”.