Code of Professional Ethics and Conduct

Topics: U.S. Securities and Exchange Commission, Profession, The Commission Pages: 6 (1894 words) Published: March 10, 2012
Code of Professional Ethics and Conduct

Integrity and Objectivity

According to the American Institute of CPAs (AICPA) Code of Professional Conduct, Section 102 is Integrity and Objectivity. Rule 102 states that “in the performance of any professional service, a member should maintain objectivity and integrity, shall be free of conflicts of interest, and shall not knowingly misrepresent facts or subordinate his or her judgment to other” ( Mr. John Irwin made materially false and misleading statements to existing and potential investors in connection with a Ponzi scheme and failed to disclose to investors that he was receiving a percentage of fees as compensation for helping to establish the fund. From February 1995 to December 2008, it was alleged John Irwin participated in a multi-million dollar Ponzi scheme orchestrated by Joseph S. Forte by soliciting investors for Forte LP and performed back office and bookkeeping functions for Forte LP that including creating and issuing to investors false quarterly statements and tax documents prepared based on false information provided by Forte. Mr. Irwin disregarded red flags that should have alerted him that the information he was passing on was false which over time allowed him to receive ill-gotten gains exceeding $5 million in purported fees and trading profits. John Irwin violated section 102.01 knowing misrepresentations in the preparation of financial statements or records and section 102.02 conflicts of interest. Mr. Irwin made false and misleading entries to the statements and records and failed to correct his mistakes and knew what he was doing was wrong. Since he was also receiving compensation for helping to establish a fund, that puts him as a conflict of interest because he now has a relationship with this company and will do whatever it takes to make this company look good financially. On July 11, 2011, the Securities and Exchange Commission (SEC) settled the civil action case against John in the United States District Court in Philadelphia. Irwin agreed to settle the Commission’s charges without admitting or denying the allegations against him and consented to a judgment that permanently enjoin him from violating the Securities Act of 1933. The judgment also order john to pay disgorgement plus prejudgment interest. Then on October 26, 2011 Mr. Irwin’s AICPA membership was terminated and was suspended from appearing or practicing before the Commission as an accountant. I agree with the disciplinary action taken because he knew what he was doing was wrong and continued to ignore it so he should not be allowed to practice accounting for the Commission anymore. The only thing I would have added was him paying back all the money he received for participating in the Ponzi scheme because these investors and potential investors trusted the statements he was preparing. As far as the AICPA preventing this type of breach in the code of conduct in the future, I believe they cannot. Integrity is based on the individual and no rule can force a person to have integrity. All the AICPA can do is when they find a person not of Integrity in the organization is suspended or terminate them as they have been doing.

Professional Competence

The general rule of 201 for Professional Competence states, a member who accepts a professional engagement implies that he or she has the necessary competence to complete the engagement according to professional standards, applying his or her knowledge and skill with reasonable core and diligence but he or she does not assume responsibility for infallibility of knowledge or judgment. Kevin F. Howley, an accountant in Wellesley, MA dishonored rule 201. It was alleged that Mr. Howley had engaged in professional misconduct in the issuance of the audit reports. Kevin failed to properly plan the audits, adequately test certain revenue, and obtain sufficient competent evidence to serve as a basis for the audit reports,...
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