To Amelia Emerson,
Controller, Widget, Inc
Integrity is the practice of being honest and showing a consistent and uncompromising adherence to strong moral and ethical principles and values. In ethics, integrity is regarded as the honesty and truthfulness or accuracy of one’s actions. Integrity can stand in opposition to hypocrisy, in that judging with the standards of integrity involves regarding internal consistency as a virtue and suggests that parties holding within themselves apparently conflicting values should account for the discrepancy or alter their beliefs.
Rule 102 – Integrity and objectivity. In the performance of any professional service, a member shall maintain objectivity and integrity, shall be free of conflicts of interest, and shall not knowingly misrepresent facts or subordinate his or her judgment to others.
Knowing misrepresentations in the preparation of financial statements or records. A member shall be considered to have knowingly misrepresented facts in violation of rule 102 [ET section 102.01] when he or she knowingly.
Makes, or permits or directs another to make, materially false and misleading entries in an entity’s financial statements or records; or
Fails to correct an entity’s financial statements or records that are materially false and misleading when he or she has the authority to record an entry; or
Signs, or permits or directs another to sign, a document containing materially false and misleading information.
Conflicts of interest. A conflict of interest may occur if a member performs a professional service for a client or employer and the member or his or her firm has a relationship with another person, entity, product, or service that could, in the member’s professional judgment, be viewed by the client, employer, or other appropriate parties as impairing the member’s objectivity. If the member believes that the professional service can be performed with objectivity, and the relationship is disclosed to and consent is obtained from such client, employer, or other appropriate parties, the rule shall not operate to prohibit the performance of the professional service.
The following are examples, not all-inclusive, of situations that should cause a member to consider whether the client, employer, or other appropriate parties could view the relationship as impairing the member’s objectivity:
A member has been asked to perform litigation services for the plaintiff in connection with a lawsuit filed against a client of the member’s firm.
A member provides tax or PFP services for several members of a family who may have opposing interests.
Obligations of a member to his or her employer’s external accountant. Under rule 102 [ET section 102.01], a member must maintain objectivity and integrity in the performance of a professional service. In dealing with his or her employer’s external accountant, a member must be candid and not knowingly misrepresent facts or knowingly fail to disclose material facts. This would include, for example, responding to specific inquiries for which his or her employer’s external accountant requests written representation.
Subordination of judgment by a member. Rule 102 [ET section 102.01] prohibits a member from knowingly misrepresenting facts or subordinating his or her judgment when performing professional services. Under this rule, if a member and his or her supervisor have a disagreement or dispute relating to the preparation of financial statements or the recording of transactions, the member should take the following steps to ensure that the situation does not constitute a subordination of judgment: