Professional Ethics Glossary- AICPA
Professional Ethics Glossary
.01 attest engagement. An attest engagement is an engagement that requires independence as defined in AICPA Professional Standards.
.02 attest engagement team. The attest engagement team consists of individuals participating in the attest engagement, including those who perform concurring and second partner reviews. The attest engagement team includes all employees and contractors retained by the firm who participate in the attest engagement, irrespective of their functional classification (for example, audit, tax, or management consulting services). The attest engagement team excludes specialists as discussed in SAS No. 73, Using the Work of a Specialist [AU section 336], and individuals who perform only routine clerical functions, such as word processing and photocopying.
.03 client. A client is any person or entity, other than the member’s employer, that engages a member or a member’s firm to perform professional services or a person or entity with respect to which professional services are performed. For purposes of this paragraph, the term “employer” does not include Entities engaged in the practice of public accounting; or Federal, state, and local governments or component units thereof provided the member performing professional services with respect to those entities is directly elected by voters of the government or component unit thereof with respect to which professional services are performed; or is an individual who is (1) appointed by a legislative body and (2) subject to removal by a legislative body; or is appointed by someone other than the legislative body, so long as the appointment is confirmed by the legislative body and removal is subject to oversight or approval by the legislative body.
.04 close relative. A close relative is a parent, sibling, or nondependent child.
.05 confidential client information. Confidential client information is any information obtained from the client that is not available to the public. Information that is available to the public includes, but is not limited to, information in a book, periodical, newspaper, or similar publication; in a client document that has been released by the client to the public or that has otherwise become a matter of public knowledge; on publicly accessible websites, databases, online discussion forums, or other electronic media by which members of the public can access the information; released or disclosed by the client or other third parties in media interviews, speeches, testimony in a public forum, presentations made at seminars or trade association meetings, panel discussions, earnings press release calls, investor calls, analyst sessions, investor conference presentations, or a similar public forum; maintained by, or filed with, regulatory or governmental bodies that is available to the public; or obtained from other public sources.
Unless the client information is available to the public, such information should be considered confidential client information.
Members are advised that federal, state, or local statutes, rules, or regulations concerning confidentiality of client information may be more restrictive than the requirements contained in the Code of Professional Conduct.
.06 council. The Council of the American Institute of Certified Public Accountants.
.07 covered member. A covered member is
§ An individual on the attest engagement team;
§ An individual in a position to influence the attest engagement;
§ A partner or manager who provides nonattest services to the attest client beginning once he or she provides ten hours of nonattest services to the client within any fiscal year and ending on the later of the date (i) the firm signs the report on the financial statements for the fiscal year during which those services were provided or (ii) he or she no longer expects to provide ten or more hours of nonattest services to the attest client on a recurring basis;
§ A partner in the office in which the lead attest engagement partner primarily practices in connection with the attest engagement;
§ The firm, including the firm’s employee benefit plans; or
§ An entity whose operating, financial, or accounting policies can be controlled (as defined in Financial Standards Accounting Board [FASB] Accounting Standards Codification [ASC] 810, Consolidation) by any of the individuals or entities described in (a) through (e) or by two or more such individuals or entities if they act together.
.09 financial institution. A financial institution is considered to be an entity that, as part of its normal business operations, makes loans or extends credit to the general public. In addition, for automobile leases addressed under interpretation 101-5, Loans From Financial Institution Clients [ET section 101.07], an entity would be considered a financial institution if it leases automobiles to the general public.
.10 financial statements. A presentation of financial data, including accompanying notes, if any, intended to communicate an entity’s economic resources and/or obligations at a point in time or the changes therein for a period of time, in accordance with generally accepted accounting principles or a comprehensive basis of accounting other than generally accepted accounting principles.
Incidental financial data to support recommendations to a client or in documents for which the reporting is governed by Statements on Standards for Attestation Engagements and tax returns and supporting schedules do not, for this purpose, constitute financial statements. The statement, affidavit, or signature of preparers required on tax returns neither constitutes an opinion on financial statements nor requires a disclaimer of such opinion.
.11 firm. A firm is a form of organization permitted by law or regulation whose characteristics conform to resolutions of the Council of the American Institute of Certified Public Accountants and that is engaged in the practice of public accounting. Firm includes the individual partners thereof except for purposes of applying Rule 101: Independence [ET section 101.01]. For purposes of applying Rule 101, firm includes a network firm when the engagement is either a financial statement audit or review engagement, and the audit or review report is not restricted, as defined by professional standards.
.12 holding out. In general, any action initiated by a member that informs others of his or her status as a CPA or AICPA-accredited specialist constitutes holding out as a CPA. This would include, for example, any oral or written representation to another regarding CPA status, use of the CPA designation on business cards or letterhead, the display of a certificate evidencing a member’s CPA designation, or listing as a CPA in local telephone directories.
.13 immediate family. Immediate family is a spouse, spousal equivalent, or dependent (whether or not related).
.14 individual in a position to influence the attest engagement. An individual in a position to influence the attest engagement is one who evaluates the performance or recommends the compensation of the attest engagement partner; directly supervises or manages the attest engagement partner, including all successively senior levels above that individual through the firm’s chief executive; consults with the attest engagement team regarding technical or industry-related issues specific to the attest engagement; or participates in or oversees, at all successively senior levels, quality control activities, including internal monitoring, with respect to the specific attest engagement.
.15 institute. The American Institute of Certified Public Accountants.
.16 interpretations of rules of conduct. Pronouncements issued by the division of professional ethics to provide guidelines concerning the scope and application of the rules of conduct.
.17 joint closely held investment. A joint closely held investment is an investment in an entity or property by the member and the client (or the client’s officers or directors, or any owner who has the ability to exercise significant influence over the client) that enables them to control (as defined in FASB ASC 810 Consolidation) the entity or property.
.18 key position. A key position is a position in which an individual has primary responsibility for significant accounting functions that support material components of the financial statements; has primary responsibility for the preparation of the financial statements; or has the ability to exercise influence over the contents of the financial statements, including when the individual is a member of the board of directors or similar governing body, chief executive officer, president, chief financial officer, chief operating officer, general counsel, chief accounting officer, controller, director of internal audit, director of financial reporting, treasurer, or any equivalent position.
For purposes of attest engagements not involving a client’s financial statements, a key position is one in which an individual is primarily responsible for, or able to influence, the subject matter of the attest engagement, as described above.
.19 loan. A loan is a financial transaction, the characteristics of which generally include, but are not limited to, an agreement that provides for repayment terms and a rate of interest. A loan includes, but is not limited to, a guarantee of a loan, a letter of credit, a line of credit, or a loan commitment
.20 manager. A manager is a professional employee of the firm who has either of the following responsibilities:
§ Continuing responsibility for the overall planning and supervision of engagements for specified clients.
§ Authority to determine that an engagement is complete subject to final partner approval if required.
.21 member. A member, associate member, or international associate of the American Institute of Certified Public Accountants.
.22 member in business. A member employed or engaged on a contractual or volunteer basis in an executive, a staff, a governance, an advisory, or an administrative capacity in such areas as industry, the public sector, education, the not-for-profit sector, or regulatory or professional bodies. This does not include a member while engaged in the practice of public accounting.
.23 network. For purposes of Interpretation No. 101-17, “Networks and Network Firms,” [ET section 101.19] a network is an association of entities that includes one or more firms that
(a) cooperate for the purpose of enhancing the firms’ capabilities to provide professional services and (b) share one or more of the following characteristics:
§ The use of a common brand name (including common initials) as part of the firm name
§ Common control (as defined in FASB ASC 810) among the firms through ownership, management, or other means
§ Profits or costs, excluding the following:
— Costs of operating the association
— Costs of developing audit methodologies, manuals, and training courses
— Other costs that are immaterial to the firm
§ Common business strategy that involves ongoing collaboration amongst the firms whereby the firms are responsible for implementing the association’s strategy and are held accountable for performance pursuant to that strategy
§ Significant part of professional resources
§ Common quality control policies and procedures that firms are required to implement and that are monitored by the association
§ A network may comprise a subset of entities within an association if only that subset of entities cooperates and shares one or more of the characteristics set forth in the preceding list.
.24 network firm. A network firm is a firm or other entity that belongs to a network, as defined in ET section 92 paragraph .23. This includes any entity (including another firm) that the network firm, by itself or through one or more of its owners, controls (as defined in FASB ASC 810), is controlled by, or is under common control with.
.25 normal lending procedures, terms, and requirements. “Normal lending procedures, terms, and requirements” relating to a covered member’s loan from a financial institution are defined as lending procedures, terms, and requirements that are reasonably comparable with those relating to loans of a similar character committed to other borrowers during the period in which the loan to the covered member is committed. Accordingly, in making such comparison and in evaluating whether a loan was made under “normal lending procedures, terms, and requirements,” the covered member should consider all the circumstances under which the loan was granted, including
§ The amount of the loan in relation to the value of the collateral pledged as security and the credit standing of the covered member.
§ Repayment terms.
§ Interest rate, including “points.”
§ Closing costs.
§ General availability of such loans to the public.
§ Related prohibitions that may be more restrictive are prescribed by certain state and federal agencies having regulatory authority over such financial institutions. Broker- dealers, for example, are subject to regulation by the Securities and Exchange Commission.
.26 office. An office is a reasonably distinct subgroup within a firm, whether constituted by formal organization or informal practice, where personnel who make up the subgroup generally serve the same group of clients or work on the same categories of matters.
Substance should govern the office classification. For example, the expected regular personnel interactions and assigned reporting channels of an individual may well be more important than an individual’s physical location.
.27 partner. A partner is a proprietor, shareholder, equity or non-equity partner or any individual who assumes the risks and benefits of firm ownership or who is otherwise held out by the firm to be the equivalent of any of the aforementioned.
.28 period of the professional engagement. The period of the professional engagement begins when a member either signs an initial engagement letter or other agreement to perform attest services or begins to perform an attest engagement for a client, whichever is earlier.
The period lasts for the entire duration of the professional relationship (which could cover many periods) and ends with the formal or informal notification, either by the member or the client, of the termination of the professional relationship or by the issuance of a report, whichever is later. Accordingly, the period does not end with the issuance of a report and recommence with the beginning of the following year’s attest engagement.
.29 practice of public accounting. The practice of public accounting consists of the performance for a client, by a member or a member’s firm, while holding out as CPA(s), of the professional services of accounting, tax, personal financial planning, litigation support services, and those professional services for which standards are promulgated by bodies designated by Council. Such standards include Financial Accounting Standards Board (FASB) Accounting Standards Codification™ (ASC), Statements on Auditing Standards, Statements on Standards for Accounting and Review Services, Statements on Standards for Consulting Services, Statements of Governmental Accounting Standards, International Financial Reporting Standards and International Accounting Standards, Statements on Standards for Attestation Engagements and Statements on Standards for Valuation Services. However, a member or a member’s firm, while holding out as CPA(s), is not considered to be in the practice of public accounting if the member or the member’s firm does not perform, for any client, any of the professional services described in the preceding paragraph.
.30 professional services. Professional services include all services performed by a member while holding out as a CPA.
.31 significant influence. The term significant influence is as defined in FASB ASC 323–10–15.
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