AICPA rules of conduct and practitioner knowledge

Accountants practicing in all segments of accounting need to understand both the relevant ethical standards of accounting and the mechanisms for enforcing these ethical standards. Further, accountants need to have an understanding of how to apply these standards in practical situations [Loeb, 1992]. In 1988, the AICPA restructured the profession's Code of Conduct. The changes resulted in a code with a more positive orientation. Since the 1988 Code restructuring, the Federal Trade Commission determined that certain rules embodied in the Code interfered with competition in violation of the FTC Act. Although the AICPA was reluctant to modify the existing Code, AICPA-FTC negotiations resulted in numerous amendments. Because of these recent changes, CPAs may be experiencing difficulty in maintaining an accurate perception of what constitutes acceptable conduct according to the Code. Consequently, this study addresses one important question. Do CPAs exhibit a satisfactory level of code knowledge when presented with a variety of ethical conflict situations? The results of this study are not encouraging for the profession.