Every business activity creates opportunities for fraudulent behavior, leading to increased demand for ethically sound auditors. Auditors today face a multitude of ethical issues, and it is even more problematic when they fail to follow the standards of professional conduct prescribed by the American Institute of Certified Public Accountants (AICPA). The objective of this paper is to analyze auditors' compliance with the code of professional conduct with respect to the effectiveness of their audits. The law requires auditors to report to the SEC any fraudulent activity discovered during an audit. This is where Article I of Rule 51 of the AICPA Code of Professional Conduct comes into play. The auditor may discover illegal acts or fraud while auditing a company's financial statements. In such cases, the auditor must determine his responsibilities to make the right judgment and report his discovery or suspicion regarding the said fraudulent activities. Tyco International is an example of auditors' failure to live up to their responsibilities. Former Tyco CEO Dennis Kozlowski and former CFO Mark Swartz sold shares without investor approval and misrepresented the company's financial condition to investors in order to increase profits. share price (Crawford, 2005). The auditors (PricewaterhouseCoopers) helped cover up the executives' actions by not revealing their findings to authorities, as it is believed they must have known about the ongoing fraud. Another example would be the Olympus scandal. The Japanese company, which manufactures cameras and medical equipment, used venture capital funds to cover its losses (Aubin & Uranaka, 2011). Apparently, middle of paper ...... information irrelevant to their work and use this information to their advantage. American Express Tax & Business Services, a subsidiary of American Express Corporation, has acquired CPA Firms. all over the United States. This practice by a non-CPA firm may encourage its employees not to serve the public interest since the firm is not subject to as many regulations as a CPA firm would be. A financial company providing accounting services poses a conflict of interest for its CPA employees. For example, the CPA provides accounting services as well as financial services like insurance sales. The ACP would approve the company's insurance products, which may affect its objectivity towards the product offered to third parties (Ponemon, 1996). The extent and nature of the services rendered greatly influence the accountant..