Question

The AICPA Code of Professional Conduct (the Code) is generally recognized as a model for the accounting profession. Other professional accounting organizations have their own Standards. Some use parts of the AICPA Code; but others are very different from the AICPA Code.

1. How is the conceptual framework used in analyzing and presenting the AICPA Code?

Answer 1

The conceptual framework approach included in these two frameworks is a way of identifying, evaluating and addressing threats to compliance with the rules resulting from a specific relationship or circumstance that is not otherwise addressed in the code. In addition to the flowchart below, you may find the Conceptual Framework Power Point presentation a useful training tool.

Exhibit 2 Steps of the Conceptual Framework Step 1: Identify Threats Step 2: Evaluate Threats Step 3: Identify Safeguards No Threats- Proceed Threats Not Significant- Proceed Existing New Threats Not at Acceptable Level-Stop Step 4: Evaluate Safeguards Threats at Acceptable Level-Proceed

Under the conceptual framework approach, users follow the following steps:

• Step 1 Identify threats to compliance with the rules. If no threats, then proceed with service. If threats are identified, then must proceed to Step 2.
• Step 2 Evaluate the significance of the threats to determine whether the threats are at an acceptable level. If threats are at an acceptable level, then proceed with service. If threats are not at an acceptable level, then must proceed to Step 3.
• Step 3 Identify safeguards that can be applied. Safeguards can be existing safeguards or new safeguards.
• Step 4 Evaluate the safeguards to determine if they eliminate or reduce threats to an acceptable level. Where you conclude that threats are at an acceptable level after applying safeguards, proceed with service. In some cases, an identified threat may be so significant that no safeguards will eliminate it or reduce it to an acceptable level, or you may be unable to implement effective safeguards. Under such circumstances, providing the specific professional services would compromise your compliance with the rules, and you would need to determine whether to decline or discontinue the professional services or resign from the engagement.

To assist with implementation, the AICPA Professional Ethics Division is developing a toolkit that will focus on how to apply the conceptual frameworks, including discussion of the specific types of threats that may exist and safeguards that may be applied to reduce or eliminate those threats to an acceptable level.