Application of Rules of Conduct to Members Not in Public Practice
Preamble
Any member who performs a service (other than for an employer) generally regarded as the practice of public accounting, must observe all the provisions of the Rules of Conduct of the Society. A member may be held responsible for compliance with the Rules of Conduct whether or not the member is compensated for services provided. A member primarily engaged in employment other than public accounting shall be held fully accountable as to the Rules of Conduct at any time the member engages in the practice of public accounting, however brief or incidental to the member’s primary occupation.
A member not engaged in the practice of public accounting must observe a limited set of rules, excepting those solely related to public practice. These rules apply to members not in public practice performing duties normally considered as financial or accounting.
Supplemental Definition
Employer: An enterprise, agency or individual directly employing a member.
Independence, Integrity, and Objectivity
Rule 101 (NP) - Independence. A member shall not permit his or her name to be associated with an employer’s financial statements in any manner so as to imply that the member is acting as an independent public accountant.
Rule 102 (NP) - Integrity and Objectivity. A member shall not knowingly misrepresent facts during the course of performing financial, tax or managerial services for his or her employer, nor shall a member subordinate professional judgment to others. A member may resolve doubt in the employer’s favor as long as there is reasonable support for the position taken.
Competence and Technical Standards
Rule 201 (NP) - General Standards. A member shall comply with the following general standards, and must justify any departures therefrom.
a. Professional competence. A member shall undertake only those assignments which the member or the member’s employer can reasonably expect to complete with professional competence.
b. Due professional care. A member shall exercise due professional care in performing job responsibilities for an employer.
c. Planning and supervision. A member shall adequately plan and supervise the functions involved in performing the responsibilities of his or her employment.
d. Sufficient relevant data. A member shall obtain sufficient relevant data to afford a reasonable basis for conclusions or recommendations in relation to the performance of his or her duties.
e. A member shall use due care in connection with the preparation or review of a forecast, and is encouraged to notify users of forecasts that such presentations and analyses are not intended to represent guarantees or certainties regarding future events. Forecasts and budgets shall be prepared with due consideration as to historical results and present or expected trends.
Rule 202 (NP) - Auditing Standards. This rule applies only to the practice of internal auditing.
A member is to comply (to the extent practicable with the employee’s job responsibilities consistent with industry practice) with the applicable generally accepted auditing standards relating to general standards and standards of field work promulgated by the Institute. When issuing internal audit reports on financial statements a member shall comply with the first three standards of reporting.* Statements on auditing standards issued by the Institute’s auditing standards executive committee are, for purposes of this rule, considered to be interpretations of the generally accepted auditing standards and departures from such statements must be justified by those who do not follow them.
*See Appendix A, "Generally Accepted Auditing Standards"
Rule 203 (NP) - Accounting Principles. A member shall make every effort in the preparation of financial statements for use outside the organization to ensure that they are presented in conformity with generally accepted accounting principles, or adequately disclose that the information is prepared on some other comprehensive basis of accounting. Should such statements contain any departure from an accounting principle promulgated by the body designated by Council to establish such principles which has a material effect on the statements taken as a whole, the member must be prepared to justify such departure. In such case, the member must describe the departure, the approximate effects thereof, if practicable, and the reasons why compliance with the principle would result in a misleading statement.
Rule 204 (NP) - Other Technical Standards. A member shall comply with other technical standards promulgated by bodies designated by Council to establish such standards, and departures therefrom must be justified by those who do not follow them.
Responsibilities to Employers
Rule 301 (NP) - Confidential Employer Information. A member shall not disclose any confidential information obtained in the course of employment except with the consent of the employer.
This rule shall not be construed (a) to relieve a member of obligations under Rules 202 and 203, (b) to affect in any way compliance with a validly issued subpoena or summons enforceable by order of the court, (c) to prohibit review of a member’s professional practices as a part of voluntary quality review under Institute of Society authorization, or (d) to preclude member from responding to any inquiry made by a duly constituted investigative or disciplinary body of the Society, Institute or State Board of Accountancy. Members of any constituted investigative or disciplinary body of the Society and the Board of Governors shall not disclose any confidential employer information which comes to their attention from members of a disciplinary proceeding or otherwise in carrying out their official responsibilities. However, this prohibition shall not restrict the exchange of information with the duly constituted investigative or disciplinary body.
Other Responsibilities and Practices
Rule 501 (NP) - Acts Discreditable. A member shall not commit an act discreditable to the profession.
Rule 502 (NP) - Not Applicable
Rule 503 (NP) - Commissions. A member shall not accept payment for a referral to an employer of products or services unless they are:
1) A normal and customary practice within the environment of the employee’s industry, and
2) An accepted policy of the member’s employer, and
3) Not a violation of any civil or criminal law or regulation.
Rule 504 (NP) - Incompatible Occupations. A member shall not concurrently engage in any business or occupation which would create a conflict of interest in fulfilling the job responsibilities to his or her employer.
