The history of the AICPA Professional Ethics Executive Committee (PEEC) and the Professional Ethics Division is an intriguing journey through the evolution of ethical standards and enforcement within the accounting profession. PEEC and its predecessor bodies have historically played a significant role in the profession’s self-regulation, enhancing transparency and protecting the public.
The early years
In 1971, PEEC, as we know it today, was officially established and the AICPA Professional Ethics Division was created to provide support for the committee’s activities. PEEC’s roots trace back to an earlier time, though, to the American Association of Public Accountants' Committee on Ethics, which was formed in 1906. The primary goal of this early committee was to develop ethical standards for members.
Fast forward to 1916, and this committee, now under the banner of the American Institute of Accountants, was empowered to evaluate members’ compliance with ethical standards. After the Wall Street crash of 1929, focus on ethics enforcement intensified. In 1940, the SEC began sharing information with the ethics committee about its investigations and disciplinary actions involving Institute members, strengthening the committee’s role in ethics enforcement.
Evolution of a senior executive committee
Over the years, the committee's responsibilities continued to expand, culminating in its current form of a senior committee of the AICPA. The AICPA Council, the governing body of the organization, assigns certain duties, powers, responsibilities, and procedures to PEEC, which are crucial to maintaining the profession's integrity and ethical standards (see AICPA bylaw sections 3.6.2 and 3.6.2.2).
Until the early 2000’s the profession was entirely self-governing. When the public’s confidence in financial reporting was shaken by corporate accounting scandals such as Enron and WorldCom, the federal government responded by establishing the PCAOB, or Public Companies Accounting Oversight Board, to oversee publicly traded companies.
Core mission
PEEC, in its role as the interpreter and enforcer of the AICPA Code of Professional Conduct (code), has a mission to promote public awareness and confidence in the integrity, objectivity, competence, and professionalism of its members, establish and enforce professional ethics standards, and assist members in improving their professional conduct and performance continually.
The Professional Ethics Division plays a crucial role in supporting and coordinating PEEC’s standard-setting and ethics enforcement activities. The division serves as a valuable resource for AICPA members and the public, publishing enrichment content, providing guidance on ethical matters, and answering inquiries through the Ethics Hotline and email.* Division staff does the legwork for investigations and works closely with members throughout the remediation process if an ethics violation has occurred.
Dedicated and diverse membership
PEEC comprises 20 members, appointed by the chair of the AICPA board of directors. These volunteers, who are also members of the AICPA, come from various backgrounds, including public accounting, law, government, academia, and industry. They invest a significant amount of their time to achieve the committee’s objectives, reflecting their dedication to upholding ethical standards in the profession.
Standard setting
A primary focus of PEEC's work is interpreting the rules of the AICPA code, guidance designed for all members, regardless of their field—public practice, industry, government, or education. As the interpreter of the rules, the committee is responsible for keeping the code fit for purpose, including adding new guidance and revising existing guidance as circumstances and the environment change.
Global alignment
As part of the ongoing work of maintaining ethical standards, PEEC works to align the AICPA ethical standards with international standards. One benefit to members is that this harmonization facilitates global mobility. Promoting transparency and public input To achieve its standard-setting objectives, PEEC conducts quarterly open meetings, inviting representatives from various regulatory bodies, state and federal entities, and other organizations. The committee actively seeks input from AICPA members, other committees, and regulators, ensuring that the code remains relevant and effective.
AICPA members and the public have always been welcome to observe quarterly meetings. Since the inception of the Covid pandemic, the ethics division has optimized meetings for remote observation and attendance has greatly increased as a result.
PEEC's commitment to transparency is evident in its efforts to keep members and the public informed. It publishes online a three-year strategy and work plan, meeting agendas, and minutes of past open committee meetings.
Proposed changes to the code are exposed for a minimum of 60 days to allow members and other stakeholders to provide feedback before final pronouncements are issued.
Enforcement
Members’ ethics violations come to light in a variety of ways: through federal regulators, state CPA societies, state boards of accountancy, and through complaints filed directly with the division. The primary goal is remediation, though occasionally violations are sufficiently severe to warrant suspension of or expulsion from AICPA membership.
Enforcement Subcommittee
PEEC has delegated investigations and enforcement to the Enforcement Subcommittee. This group considers information division staff gathers through investigations related to independence, behavioral standards, and technical standards and offers settlement agreements and recommendations for corrective actions for members found in violation of the code.
At times, the AICPA sends a letter requiring a member’s corrective action in lieu of a full investigation. This corrective action is generally recommendations for CPE or a pre-issuance review. A member can reject this initial offer and request a full investigation, which could involve an interview requested by the respondent conducted by a subcommittee member.
When AICPA members have been sanctioned by the SEC, PCAOB, IRS, or a state board of accountancy, the AICPA automatically assigns appropriate sanctions, which a member can appeal. Cases that are successfully appealed are forwarded to the subcommittee for consideration. The subcommittee handles most cases without PEEC’s direct input. However, when violations are severe enough that the subcommittee determines admonishment, suspension, or expulsion would be appropriate, PEEC reviews the details of the case and the recommendations. After PEEC and the subcommittee agree on a course of action, the division sends a settlement agreement to the member. If the member rejects the agreement, the case goes before the AICPA Joint Trial Board for final adjudication.
All investigations are conducted confidentially, protecting members' due process rights. After an investigation closes, if the case is especially egregious with potential harm to the public, the high-level final disposition will be published.
Joint Ethics Enforcement Program
In 1978, the Joint Ethics Enforcement Program (JEEP) was established, allowing for uniform enforcement of ethical standards for members of the AICPA and state CPA societies. Most state societies have adopted the AICPA code; JEEP promotes consistency and allows a single investigation by either the state society or the AICPA. When either body completes an investigation, there’s a process for agreement and alignment. If either body disagrees with the outcome and recommendations of the original investigation, that body can pursue its own course for resolution. Currently, 49 US jurisdictions are JEEP participants: 46 states and 3 territories.
In closing
PEEC's work extends beyond mere standard-setting and enforcement. The committee’s existence shows the AICPA’s commitment to upholding the highest ethical standards within the accounting profession. Through decades of evolution and adaptation, PEEC continues to serve as a guardian of integrity and professionalism in the field.
* To reach the hotline, call 888.777.7077 (option 3 then option 3) or email ethics@aicpa.org.