Providing Financial Services to Clients
Since 1946

Formerly the Independent Accountants Association of Michigan.


Ethical Code and Conduct

Code of Ethics

For members of


 

I.              Members of this association shall not violate the confidential relationship between themselves and their clients or former clients.

II.             Members of this association shall not render a professional service for a contingent fee during any periods where the professional services consists of an audit engagement, a review engagement or a compilation engagement, including the period of time covered by any historical financial statements involved while performing an audit, a review or a compilation engagement: further, a member shall not offer to accept or accept a contingent fee for the preparation of original or amended tax returns or claims for tax refunds.

III.            Members of this association or a firm of which they are a partner or shareholder shall not express an opinion on financial statements of an enterprise unless they and their firm are independent of such enterprise. Accordingly, members shall not express an opinion nor perform a review or compilation of financial statements of an enterprise financed in whole, or in part, by public distribution of securities or on financial statements for use as a basis of credit or if they or members of their immediate family own or are committed to acquire a substantial financial interest in the enterprise, or during the period covered by an audit, review, or compilation, they have been a director officer or employee of the enterprise unless such interest or relationship is disclosed in the report.

IV.            Members of this association shall not allow any persons to practice in their corporate, partnership or individual name who is not a partner, professional corporation, co-shareholder or in their employ.

V.             Members of this association who render professional services including an audit engagement, a review engagement or a compilation engagement shall not at the same time engage in any business or occupation which would create a conflict of interest while performing the aforementioned professional services.

VI.           Members of this association shall be diligent, thorough and completely candid in expressing an opinion or other assurance on financial statements they have audited, reviewed or compiled.

VII.           Members of this association shall not sign an audit report purporting to express their opinion as a result of an audit or examination of financial statements, unless they or, members, or employees of their firm, have audited or examined the financial statements.

VIII.         Members of this association shall not permit their name to be used in conjunction with any special purpose statement prepared for their clients that anticipates results of future operations, unless they disclose the source of the information used and what assumptions they have made, and unless they indicate they do not vouch for the accuracy of the forecast.

IX.            Members of this association shall not accept a commission from any person or client for whom the member offers or renders concurrently a professional service, where the professional service consists of an audit engagement or a review engagement (including the period of time covered by any historical financial statements involved while performing an audit or review engagement), nor accept a commission where the member performs a compilation of a financial statement when the member expects or reasonably might expect that a third party will use the financial statement and the member’s compilation report or transmittal does not disclose a lack of independence.

X.             Members of this association shall not seek to obtain clients by advertising or other forms of solicitation in a manner that is false, misleading or deceptive.

XI.            Members of this association who engage in the practice of accounting as a sole proprietor shall not use a plural term in the name of their firm, as “and company” or “and associates” or any other terms which would indicate anything other than individual ownership.

XII.           Members of this association who receive an engagement for services by referral from another accountant shall not discuss or accept an extension of their services beyond the specific engagement without first consulting the referring practitioner.


Rules of Professional Conduct
For members of 

 

Each member of MTAP pledges to abide by the Rules of Professional Conduct and the Interpretations thereof, contained herein.

In all instances where reference is made to a "member" it shall be deemed to include the member personally, a partnership or professional corporation of which he may be a member, or any of his employees. References to the male gender shall be construed to refer to the female gender also. There will be instances where a particular matter is not specifically covered by the Rules or Interpretations, and these instances would be submitted to the state board of directors for decision. Every member who is uncertain as to the application of any Rule should contact the MTAP office. The circumstances will be submitted to the state board of directors, which will render an advisory opinion.

The Rules of Professional Conduct are rules of reason and should be interpreted with reference to the conduct of the public practice of accounting in the highest ethical manner, instilling confidence in the client that his accounting affairs are handled in a competent, ethical and prudent fashion. The Interpretation accompanying each Rule explains and clarifies the meaning and purpose of the Rule. The Interpretations are intended as guides. It is the text of each Rule that is controlling.

For the purposes of these Rules of Professional Conduct the following definitions shall apply:

"Audit" means an examination of financial statements of an entity, conducted in accordance with generally accepted auditing standards, to determine whether, in the accountants opinion, the statements conform with generally accepted accounting principles or, if applicable, with another comprehensive basis of accounting.

"Compilation of a financial statement" means presenting in the form of financial statement information that is the representation of any other person without the accountant's undertaking to express any assurance on the statement.

"Commission" means compensation, except a referral fee, for recommending or referring any product or services to a client or other person that is supplied by another person or party.

"Review" means to perform an inquiry and analytical procedures that permit the accountant to determine that there are no material modifications that should be made to financial statements in order for them to be in conformity with generally accepted accounting principles or, if applicable, with another comprehensive basis of accounting.

"Trade name" means a name used to designate a business enterprise.

RELATIONS WITH CLIENT AND PUBLIC

Rule No. 1: Confidentiality.  A member shall not violate the confidential relationship between himself and his client or former client.

Interpretation No. 1: Mutual confidence between a client and his accountant is one of the accounting profession's best characteristics and greatest assets.

This Rule is intended to prohibit discussion of the client's or former client's business and personal affairs with an unauthorized person outside of general and public common knowledge. Even in this area, the member should avoid all statements that would tend to formulate an opinion in the mind of the hearer. Information of any nature about a client or his business, or his personal affairs, would not be disclosed to anyone by the member without the client's consent. Should the information be such as to have a material adverse effect on any report or tax return being prepared by the member, and the client will not consent to the disclosure of the information, the member should refuse to prepare the report or tax return and should withdraw from the assignment. The member should first use every available means to justify his position and to persuade the client to disclose the information. Work papers are solely owned and controlled by each member. Should a member be succeeded by another accountant, for any reason, the work papers of the member shall not be disclosed to the successor accountant without the client's authorization. This Rule shall in no way be construed to affect a member's compliance with a validly issued subpoena or summons enforceable by court order.

Rule No. 2: Contingent Fees.  Professional services shall not be offered or rendered to a client for a contingent fee during any period where the professional services consists of an audit engagement, a review engagement or a compilation engagement, including the period of time covered by any historical financial statements involved while performing an audit, a review or a compilation engagement.

This rule applies also to an offer to accept or the accepting of a contingent fee for the preparation of original or amended tax returns or claims for tax refunds. A contingent fee means a fee established for the performance of any service pursuant to an arrangement in which no fee will be charged unless a specified finding or result is attained, or in which the amount of the fee is otherwise dependent upon the finding or result of such service. This Rule does not apply to cases involving federal, state or other taxes, in which the findings and conclusions are those of the tax authorities and not those of the member, nor does this Rule apply to fees to be fixed by courts or other public authorities, which are of an undetermined amount at the time the engagement is undertaken.

Interpretation No. 2.  A fee based upon the result obtained where the member's professional services consist of an audit engagement, a review engagement, or a compilation engagement, not only affects the independence of the member, but tempts the member to perform services, or render advice that in the short run might be helpful to the client, and thus increase the member's fee, but which services or advice might be detrimental to the client at some future time. The member must be above suspicion that his services are being influenced by the expected size of the potential fee. It is of paramount importance that the client is comfortable with the thought that the member is exercising his best efforts and skills in the client's behalf and at a reasonable charge for the services received.

Rule No. 3: Independence.  A member or a firm of which he is a partner or shareholder shall not express an opinion on financial statements of an enterprise nor perform a review or compilation of financial statements unless he and his firm are independent of such enterprise. Accordingly, a member shall not express an opinion nor perform review or compilation of financial statements of an enterprise financed in whole, or in part, by public distribution of securities or on financial statements for use as a basis of credit if he or a member of his immediate family owns or is committed to acquire a substantial financial interest in the enterprise, or during the period covered by an audit, review or compilation he has been a director, officer or employee of the enterprise unless such interest or relationship is disclosed in the report. 

Interpretation No. 3.  The prime factor to be considered in the Rule is whether the member is actually "Independent".  A temptation could be present to discolor a report if the member's own financial position were to affected. The reader of the report is entitled to know the relationship of the member to the client so that he can draw his own conclusions. The member would serve his profession and himself best if he avoided all financial involvements that could lead to questioning of his independent judgment. The fact that a member is a director of a religious, charitable, civic or other type of non-profit organization will not prevent him from acting as an independent accountant so long as the member remains a passive director. This shall not prevent an accounting partnership or corporation from performing audits or expressing opinions on financial statements of such non-profit organizations, if a member of the accounting firm serving as a director of the non-profit organization takes no part in the examination and the relationship is fully disclosed in the audit report.

OPERATING PRACTICES

Rule No. 4: Use of Firm Name.  A member shall not allow any person to practice in his corporate, partnership or individual name who is not a partner, professional corporation co-shareholder, or an employee.

Interpretation No. 4.  Public accounting is the rendition of personal services for which an individual accountant or his business entity (partnership or corporation) assumes full liability and responsibility, not only for his acts, but also for those who are under his jurisdiction or control. The Rule is intended to assure the client that the member who renders an opinion on an audit, or a report on a review or compilation of financial statements, is the one who made the examination (or who caused it to be made), or who performed the services required, and who assumes responsibility for it. This Rule does not prevent a member from engaging the services of another accountant, provided he supervises the work done, and the engagement is on a professional basis between the two accountants.

EXAMPLE -- Should a member refer work to another accountant who is not on his staff or in his employ, he would advise the other accountant that the work must be returned to the member for transmittal to the client. The other accountant should be advised his status is that of an independent contractor, engaged by the member -- not the client. If the other accountant reports directly to the client, it would be a violation of this Rule.

EXAMPLE -- Two or more accountants who share the same office should not indicate in any way that they are partners, unless an actual partnership exists. To do otherwise might mislead the client, the public, credit grantors, and reflect adversely on the accounting profession.

Rule No. 5: Conflict of Interest.  A member who renders professional services including but not limited to, an audit engagement, a review engagement or a compilation engagement, shall not at the same time engage in any business activity or occupation which would create a conflict of interest while performing the aforementioned professional services.

Interpretation No. 5.  Any business activity which comprises a member's independence, integrity or personal objectivity while rending professional services violates this Rule

TECHNICAL STANDARDS

Rule No. 6: Financial Statements.  In expressing an opinion on an audit or other assurance on financial statements a member has audited or reviewed, the member shall:

(a) Acquire sufficient information to warrant the expression of an opinion, or to give limited assurances on a review, or if exceptions are sufficiently material to negate the expression of an opinion or assurance he shall clearly disclaim an opinion; and

(b) Disclose any material fact known to him, the disclosure of which is necessary to make financial statements not misleading; and

(c) Report any material misstatement known to him to appear in the financial statement; and (d) Direct attention to any material departure from generally accepted auditing procedures or generally accepted accounting principles in the circumstances.

Interpretation No. 6.  The ultimate objective of the audit or examination of a financial statement is to be able to express an opinion on the fairness thereof. This Rule compels the member to do a competent job in making an audit or examination and to disclose any material fact known to him; and if he has not satisfied himself that the statement is a fair one, he must say so. Nowhere in these Rules will a member's integrity and independence be more fully set forth.

He is required to be competent in his work, to know the proper procedures to use in his examination, and, last but not least, to tell the truth about what he finds. Confidence of the public in the public accounting profession depends more upon compliance with this Rule than any other.* Members may be permitted under state law or regulation to issue a transmittal on a financial statement based on Generally Accepted Tax Accounting principles as adopted and updated periodically by the standard setting body of the National Society of Public Accountants, the national affiliate of the Independent Accountants Association of Michigan. A member who is licensed may be required by a state board of accountancy to issue a compilation or review report based on Generally Accepted Accounting Principles or such other comprehensive basis of accounting as approved by competent authority.

Note: The National Society of Public Accountants Board of Governors had adopted for NSA and its participating ASOs the "Statements on Auditing Standards" issued by the American Institute of Certified Public Accountants. The national society has also concluded that the technical aspects of the Statements on Standards for Accounting and Review Services (SSARS) are based on sound accounting principles and ethical standards.

Rule No. 7: Responsibility for work.  A member shall not sign an audit report purporting to express his opinion as a result of an audit or examination of financial statements unless he or members or employees of his firm have audited or examined the financial statements.

Interpretation No. 7.  Signing a report under this Rule means the authorized signature of the member or his firm. Any member of the firm, or an employee, may actually sign the report if he is authorized to do so.

This Rule prohibits a member from neither signing a report when the audit or examination has been made by another accountant not under the control of nor acting as an agent of, the signing member. Such action makes the signing member directly and legally responsible for the report, which responsibility should not be assumed without personally making the examination. A member may engage the services of another accountant on a professional basis to perform a portion of an audit, a review or a compilation provided the member is confident of the ability of the second accountant and, provided further, that the second accountant assumes complete responsibility for the work he performs.

Rule No. 8: Forecasts.  A member shall not permit his name to be used in conjunction with any special purpose statement prepared for his clients that anticipates results of future operation, unless he discloses the source of the information used and what assumptions he has made, and unless he does not vouch for the accuracy of the forecast.

Interpretation No. 8.  This Rule is not intended to prevent a member preparing such statements as budgets, cost analyses, cash flow statements, estimates of future financial condition, estimated operating statements, etc. These are all tools of management and are used in making decisions. When a member is asked to add his name to the statement it indicates that it will be referred to third parties. He should at the time disclaim any responsibility for future unknown events. These special statements are ordinarily for use of management and should be confined to that purpose.

PROMOTIONAL PRACTICES

Rule No. 9: Commissions.  A member shall not accept a commission from any person or client for whom the member offers to render or renders concurrently professional service where the professional services consists of an audit engagement or a review engagement (including the period of time covered by any historical financial statements involved while performing an audit or a review engagement), nor accept a commission where the member performs a compilation of a financial statement when the member expects or reasonably might expect that a third party will use the compiled financial statement and the member's compilation report or transmittal does not disclose a lack of independence.

Interpretation No. 9. The Rule prohibits a member from accepting a commission from a client for any purpose, when the member offers to render or does render a professional services to the client which may consist of either an audit engagement or a review engagement, or a compilation engagement as defined in this Rule.

A commission is defined to mean compensation, except a referral fee, for recommending or referring any product or service to the client when the product or service is supplied by another person. This Rule does not prohibit payments to the member for the purchase of an accounting practice, nor does this Rule prohibit retirement payments to a member formerly engaged in the public practice of accounting, or payments to his heirs or estate. In instances where it is permissible for a member to accept a commission for the sale of goods or service by a third party to a person or client for whom the member renders accounting services, the member shall make disclosure of the fact of receipt of commission to the person or client to whom the member recommends or refers a product or service to which the commission relates.

Rule No. 10: Advertising and Solicitation.  A member shall not seek to obtain clients by advertising or other forms of solicitation in a manner that is false, misleading or deceptive. Solicitation by the use of coercion, overreaching or harassing conduct is prohibited.

Interpretation No. 10-1.  Types of Information Advertising must be factual, informative and objective. This may include, but is not limited to the following information about the member's firm, applicable state law and regulations permitting.

a. Names, addresses, telephone numbers, number of partners, shareholders, or employees, office hours, foreign language competence, and date the firm was established.

b. Services offered and fees for such services, including hourly rates and fixed fees.

c. Educational and professional attainments, including date and place of license, registration or certification, schools attended, dates of graduation, degrees received, and memberships in professional associations.

d. Enrollment to practice before the IRS to the extent allowed by Treasury Department Circular No. 230.

e. Accreditation by the Accreditation Council for Accountancy and Taxation.

Interpretation No. 10-2.  False, Deceptive or Misleading Acts Advertising or other forms of solicitation that are false, misleading or deceptive or contain any other representation that would be likely to cause a reasonable person to misunderstand or be deceived are not in the public interest and are prohibited.

Interpretation No. 10-3. Letterheads and Cards.

(a) Titles

1. Where a member is licensed by the state board of accountancy, the member should use the title conferred under state law for the public practice of accountancy.

2. Where a member is not licensed, the preferable title is "Accountant", if not prohibited under state law. In those few instances where state law prohibits the title "Accountant" for individuals not licensed, it is suggested that appropriate titles may include "Business and Tax Services", "Financial Services", "Estate Planning", or such other appropriate title that reflects the member's concentration of practice, or best describes the services that the member renders.

(b) Announcement Cards Announcement cards and/or advertisements consistent with this Rule may be used when opening an office, when a new person is added to the firm, when one moves to a new location and on similar occasions. The announcement cards may be distributed to clients, prospective clients, family and personal friends, and others with whom the accountant has contact on a professional basis, such as bankers, lawyers, financial planners and other accountants.

(c) Enrolled Status and Accreditation A firm may indicate "Enrolled to Represent Taxpayers before the Internal Revenue Service" or "Enrolled to Practice before the Internal Revenue Service," to the extent permissible by Treasury Department Circular No. 230 as long as all persons whose names appear are enrolled to practice if all are not enrolled agents, then the indication must be made in a manner to clearly show which persons re, in fact, enrolled. An asterisk would be an appropriate means of making this clear. The same is true for the indication of accredited status as an Accredited Tax Preparer or an Accredited Tax Advisor. The phrase "Accredited by the Accreditation Council for Accountancy and Taxation" may be used where permissible under state law. Accreditation is for individuals only. The "Accredited by the Accreditation Council for Accountancy and Taxation" designation may not be used to imply that a corporation or firm is accredited.

Rule No. 11: Firm Names.  A member who engages in the practice of accounting as a sole proprietor shall not use a plural term in the name of their firm, as "and company" or "and associates" or any other terms which would indicate anything other than individual ownership.

Interpretation No. 11.  A member should make every effort to avoid misleading the public with regard to the type of entity under which the member conducts his practice. The terms "and associates" and "and company" are terms which indicated a partnership or a corporation form of business entity. A member who practices as a sole proprietorship with responsibility and liability for his practice misleads the public into believing that he practices as a partnership when the terms "and associates" or "and company" are utilized. Accordingly, members shall not practice under a firm name which is misleading as to the type of organization (proprietorship, partnership or corporation). However, names of one or more past partners or shareholders may be included in the firm name or a successor partnership or corporation. Also, a partner surviving the death or withdrawal of all other partners may continue to practice under the partnership name for the duration permitted under state law. A firm may not designate itself as "Members of the Independent Accountants Association of Michigan" unless at least one of its partners or shareholders are members of the Association. A member may practice under a trade name providing the member complies with state (or local) fictitious trade name laws.

Rule No. 12: Professional Referrals A member who receives an engagement for services by referral from another accountant shall not discuss or accept an extension of his services beyond the specific engagement without first consulting with the referring accountant.

Interpretation No. 12.  Every member should accept the fact that he is not an expert in every phase of accounting and tax practice. He is morally bound to refer matters beyond his capacity to someone more proficient in the subject involved. A member who receives an engagement for services by referral from another accountant shall not accept the client's request to extend his service beyond the specific engagement without notifying the referring accountant, nor shall he seek to obtain any additional engagement from the client. This Rule is intended to prevent the referee from replacing the referring account merely because he has successfully handled one portion of the assignment.
 

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