Synopsis

Article II of the AICPA Code of Professional Conduct requires members to “accept the obligation to act in a way that will serve the public interest, honor the public trust, and demonstrate commitment to professionalism.” While professing an obligation to serve society, public accountants struggle to balance their responsibility to the public with their need to please the corporate managers who pay their fees. Competitive pressures increased substantially during the 1970s, 1980s, and 1990s. U.S. public companies announced 919 earnings restatements during the five and a half years between January 1997 and June 2002. Accounting critics claim the rise of commercialism within the public accounting profession contributed to the increased number of financial reporting problems.

Discussion Questions

1. What distinguishes a profession from a business?
2. Why did the AICPA amend its Code of Professional Conduct in 1978 to permit public accountants to advertise?
3. Why did the U.S. Supreme Court overturn Florida’s restriction on direct solicitation?
4. How might competitive bidding for audit engagements hurt audit quality?
5. According to the AICPA Special Committee on Assurance Services, why did auditing face a dim future in the early 1990s? What did the committee recommend?
6. What were the anticipated benefits of the proposed Cognitor designation?
7. How might compensating audit partners for cross-selling tax and consulting services hurt audit quality?
8. How might the breakup of Arthur Andersen and Andersen Consulting have hurt Andersen’s audit quality?