Assurance Services

Not every auditor is the same. Each accounting firm has its own values, culture, and reputation that you should consider in addition to their quote. This month, we’ll dive into another key factor in choosing a trustworthy auditor for your company: Ethics.

Common Ethical Violations

Though rare, ethics violations occur regularly in the accounting industry, and some misbehavior can affect their clients directly. These are a few of the common reasons firms face disciplinary actions for their unethical practices:

  • Practicing without an active CPA license from the state of residence
  • Failing to perform services that were agreed upon in a contract
  • Misrepresenting financial information (often used to boost a company’s net worth)
  • Refusing or failing to release client records in a timely manner
  • Breaking client confidentiality by revealing private information without client’s consent
  • Using the CPA firm’s money for personal expenses
  • Acting in a discreditable way to the profession: examples include lacking integrity, objectivity, independence, or due professional care

Who Holds Accountants Accountable?

When auditors become Certified Public Accountants (CPA), they fall under a set of ethical standards enforced by the American Institute of Certified Public Accountants (AICPA) as well as their state’s CPA society. Standards include professional conduct as well as other laws and regulations.

Other members of the AICPA as well as nonmembers may file complaints against auditors that may have violated the Institute’s ethical standards. The AICPA responds to these complaints by investigating the member in question.

State Laws and Licenses

In addition to CPA membership bodies, some violations may also fall under the laws and regulations of the state in which the firm practices. Firms or individuals who are found to have also broken state laws may face additional disciplinary actions and/or have their licenses revoked.

You can search your state’s professional licensing agency to find out if a CPA or CPA firm’s license is active.

If the AICPA or other governing body finds an accountant guilty of violating their ethical standards, the accountant will receive disciplinary actions from the respective body and could have their membership suspended or revoked.

The most important thing to keep in mind is that auditors are not required to tell clients or potential clients of any disciplinary actions they have received.

Do Your Research

You can help protect yourself from hiring unethical auditors by searching the AICPA’s website for violations on the auditors handling your account. Remember that ethical violations are listed under the individual’s name, not the name of the firm.

Once you’re on the website, type at least their last name in the search bar at the top and hit enter. This will only produce results since 2011.

For earlier violations, perform a quick online search using your auditor’s name and the words “ethical violations” (i.e. John Doe ethical violations). Use your best judgment to find legitimate sources of information, whether it comes from government sites or news outlets.

If you have questions or need help understanding ethical issues in general or a specific violation, please feel free to contact us. We are here to serve you!

Want to learn more? Check out our blog series on how to choose an auditor.