Definition
The Acts Discreditable Rule, ET 1.400.001, states that a member shall not commit an act discreditable to the profession. Interpretations give examples and set duties. They include the Records Requests interpretation (ET 1.400.200), negligence in preparing financial statements or records, and failing to follow the requirements of governmental audits. State boards of accountancy have their own conduct rules that may apply in addition.
Why it matters in an audit or review
The rule reaches conduct outside the audit itself. Disciplinary bodies and peer reviewers look at how a firm handles client records, communicates with clients, and follows required standards in regulated work. A finding can lead to referral to a state board.
Example
Illustrative: a firm prepares financial statements for a lender using figures it knows are unsupported. The firm risks a finding under the rule for negligent preparation, and may have breached other Code provisions as well.
Common mistakes
- Reading the rule as limited to criminal acts.
- Focusing on the AICPA Code and overlooking state board rules.
Sources
- AICPA, Code of Professional Conduct, ET 1.400.001, Acts Discreditable Rule, and interpretations under 1.400: https://pub.aicpa.org/codeofconduct/ethics.aspx
- State board of accountancy rules of professional conduct
Definitions paraphrase AICPA and FASB guidance; read the standard itself before relying on a requirement. Example figures are illustrative. This page is guidance, not professional advice. Report an error