Question

Instructions: Answer the following in complete sentences using the AICPA's revised Code of Conduct, providing the ET references for each of your responses. For questions with multiple ET references as appropriate.

4. Should a member in business allow pressure from others to result in a breach of the Integrity and Objectivity rule?

Answer 1

1. Pressure to Breach the Rules

In June 2017, PEEC adopted this new interpretation following review of a similar provision in the IESBA ethics code. The “Pressure to Breach the Rules” interpretation relates only to members in business & falls under the “Integrity & Objectivity Rule”. This interpretation provides guidance to members who come under pressure from various parties where they perform professional services & provides several examples, factors to consider & safeguard.

The interpretation addresses pressures that could result in a member taking actions that breach / cause others to breach the rules & guides the member / addressing threats to compliance with the “Integrity & Objectivity Rule” when undertaking a professional service.

A member should not allow pressure from others to result in a breach of the “Integrity & Objectivity Rule” & should also not place pressure on others that the member knows / has reason to believe, would result in the other individuals breaching the rules of the AICPA code of professional conduct

Examples of pressure that could result in a breach of “Integrity & Objectivity Rule” includes the following:

1. Pressure related to conflicts of interest e.g. pressure from a family member bidding to act as a vendor to the member’s employing organization to select that vendor over another prospective vendor
2. Pressure to influence the presentation of information, e.g., the following:
   1. Pressure to report misleading financial results to meet investor, analyst, or lender expectations.
   2. Pressure from elected officials to misrepresent programs / projects to voters
   3. Pressure from colleagues to misstate income, expenditure, or rates of return to bias decision making on capital projects & acquisitions.
   4. Pressure from superiors to approve / process expenditures that are not legitimate business expenses.
   5. Pressure to act without enough competence or due care (fore example, without enough skills / training / under unrealistic deadlines
   6. Pressure to manipulate performance indicators from superiors, colleagues, or others For examplethose who may benefit from participation in compensation or incentive arrangements.

3. The culture & leadership of the employing organization including the extent to which it emphasizes the importance of ethical behavior & the expectation that employees will act in an ethical manner. E.g., a corporate culture that tolerates unethical behavior may increase the likelihood that the pressure would result in a breach of the rules.
4. Policies & procedures, if any, that the employing organization has established, For example ethics or human resources policies that address pressure

2. In such situation, member may wish to consult with the following.

• A colleague, superior, human resources personnel, internal compliance personnel, / another professional accountant.
• Relevant professional / regulatory bodies / industry associations.
• Legal counsel.

3. If the member determines that the pressure would result in a breach of the “Integrity & Objectivity Rule”, the member might consider safeguards, including these:

• Discussing the matter with the individual who is exerting the pressure to seek to resolve it.
• Discussing the matter with the member’s supervisor if the supervisor is not the individual exerting the pressure.
• Escalating the matter within the employing organization, e.g., with higher levels of management, internal or external auditors/ those charged with governance, including independent directors &, when appropriate, explaining any consequential risks to the organization.
• Requesting restructuring or segregating certain responsibilities & duties so that the member is no longer involved with the individual / entity exerting the pressure, when doing so would eliminate the pressure to breach the “Integrity & Objectivity Rule.” E.g., if a member is pressured in relation to a conflict of interest, the pressure to breach the rule may be eliminated if the member avoids being associated with the matter creating the conflict.
• Disclosing the matter in accordance with the employing organization’s policies, including ethics & whistleblowing policies, using any established mechanism, For examplea confidential ethics hotline.
• Consulting with legal counsel.

4. In situations in which the member determines that the pressure to breach the “Integrity & Objectivity Rule” has not been eliminated, the member should do the following:

• Decline to undertake / discontinue the professional activity that would result in a breach of the rule.
• Consider whether to continue a relationship with the employing organization.

5. The member is also encouraged to document the facts, the communications, the courses of action considered, the parties with whom these matters were discussed, & how the matter was addressed.