Proposed Ethics Interpretation – Knowing Misrepresentations in the Preparation and Presentation of Information

AICPA Members in business may be involved in the preparation and presentation of information for use both internally and externally to an employing organization. This includes financial and non-financial information, such as performance reports, budgets, forecasts, tax returns, and more. Members who are responsible for recording, maintaining, preparing, approving, or presenting information should do so in accordance with the AICPA’s Code of Professional Conduct, specifically rules related to integrity and objectivity. A proposed ethics interpretation makes clarifications to expectations for these members.

A member in business would be in violation of integrity rules in the following circumstances:

  • Makes, or permits or directs another to make, materially false and misleading entries in financial statements or records;
  • Fails to correct financial statements or records that are materially false and misleading when the member has the authority to record the entries; or
  • Signs, or permits or directs another to sign, a document containing materially false and misleading information.

The member should use professional judgment to identify and take into account the purpose for which the information is to be used, the context in which it is provided, and the audience to whom it is addressed.

If the member knows, or has reason to believe, that information is misleading, the member should seek to resolve the matter, including discussing concerns with the member’s supervisor or other appropriate internal parties, and requesting appropriate action.

If the member continues to have reason to believe that the information is misleading, responses should include consulting with a relevant professional body or consulting legal counsel. The member also should consider resignation. However, resignation still may not relieve the member of a responsibility to disclose concerns to third parties, such as regulatory authorities or the external accountant.

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