Ethics interpretation.

Ethics Interpretation

Ethics interpretations and rulings are promulgated by the executive committee of the professional ethics division to provide guidelines as to the scope and application of the rules but are not intended to limit such scope or application. Publication of an interpretation or ethics ruling in the Journal of Accountancy constitutes notice to members. A member who departs from interpretations of rulings shall have the burden of justifying such departure in any disciplinary hearing.

(The Professional Ethics Executive Committee has made editorial revisions to an interpretation under Rule 501 of the Code of Professional Conduct [AICPA Professional Standards, ET section 501.06] to clarify that the Public Company, Accounting Oversight Board would be considered a regulatory agency for purposes of this interpretation. The remainder of the interpretation is unchanged. Added text is in boldface italics.)

INTERPRETATION 501-5 UNDER RULE OF CONDUCT 501

.06 501-5--Failure to follow requirements of governmental bodies, commissions, of other regulatory agencies.

Many governmental bodies, commissions of other regulatory agencies have established requirements such as audit standards, guides, rules, and regulations that members are required to follow in the preparation of financial statements of related information, of in performing attest or similar services for entities subject to their jurisdiction. For example, the Securities and Exchange Commission, Federal Communications Commission, state insurance commissions, and other regulatory agencies, such as the Public Company Accounting Oversight Board, have established such requirements.

If a member prepares financial statements or related information (for example, management's discussion and analysis) for purposes of reporting to such bodies, commissions, of regulatory agencies, the member should follow the requirements of such organizations in addition to generally accepted accounting principles. If a member agrees to perform an attest of similar service for the purpose of reporting to such bodies, commissions, or regulatory agencies, the member should follow such requirements, in addition to generally accepted auditing standards (where applicable). A material departure from such requirements is an act discreditable to the profession, unless the member discloses in the financial statements of his of her report, as applicable, that such requirements were not followed and the reasons therefore.

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