Auditing Principles - Professional Ehtics
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What is meant by the term ethical dilemma?
Making a decision about an appropriate behavior when the results affect 1 or more individuals
What is the basic purpose of a code of ethics for a profession?
To add credibility to a profession and trustworthiness
In what organizational forms may CPA practice accounting?
A member may practice public accounting only in a form oforganization permitted by law or regulation whose characteristics conform toresolutions of Council.
A member shall not practice public accounting under a firm namethat is misleading. Names of one or more past owners may be included in thefirm name of a successor organization.
A firm may not designate itself as "Members of the AmericanInstitute of Certified Public Accountants" unless all of its CPA ownersare members of the Institute.
Which of the following is not a covered member for an attest engagement
under rule 101 of the AICPA code of processional conduct?
A partnerin the national office of the frim that performs marketing services
Which of the following is not prohibited by the AICPA code of professional
Advertising in newspapers
In which of the following situations would a public accounting firm have violated the AICPA code of professional conduct in determining its fee?
A fee is based on whether or not the public accounting firm’s auditreport leads to approval of the cilent’s application for banking services
A public accounting firm would least likely be considered in violation
of the AICPA independent rules in which of the following instances?
A partner’s checking account which is fully insured by the FDIC is heldat a financial institution for which the public accounting firm performs attestservices
Which of the following in implied when a CPA signs the preparers declaration
on a federal income tax return?
The return in not misleading based on the information which the CPA hasknowledge
The AICPA code of professional conduct states that the CPA shall not
disclose any confidential information obtained in the course of engagement except
with the consent of the client this rule may preclude a CPA from responding to
an inquiry made by:
A CPA shareholder of the client corporation
Which of the following is most likely to be a violation of the AICPA
rules of conduct by Bill Jones a sole practitioner with no other employees
Jones names his firm, Jones and Smith CPAs
Bill Adams CPA accepted the audit engagement of Kelly Company. During the
audit, Adams became aware of his lack of competence required for the engagement.
What should Adams due?
Suggest the client engage another audit company
Which of the following nonattest services may be performed by the auditors
of a public company?
Preparation of the company’s tax return
In providing nonattest services to an attest client, a CPA is allowed
to perform which of the following functions?
Training client employees
Rule 202 compliance with standards requires CPAs to adhere to all of
the following applicable standards except:
Statement of responsibilities for assurance services
Which of the following provisions is not included in the Institute of Internal
Auditors code of ethics?
Use of appropriate sampling methods to select areas for audit
Steps in Resolving an Ethical Dilemma
- Id problem
- Id possible courses of action
- Id constraints relating to decision
- Analyze likely effects of action
- Select best course of action
Code of Professional Conduct AICPA
- two sections:
Principles of the Code
- Public Interest
- Objectivity and Independence
- Due Care
- Scope and Nature of Services
Rules of the code
- Integrity and Objectivity
- General Standards
- Compliance with Standards
- Accounting Principles
- Confidential Client Information
- Contingent Fees
- Acts of Discreditable
- Advertising and other forms of solicitation
- Commissions and Referral fees
- Form of organization and name
Independence (R of C)
- (Rule 101)
- Of Mind
- Of Apperance
Threats to Independence
Financial Self-Interest - owns stock in client
Adverse Interest - Litigation btwn client/cpa
Undue Influence - pressure from client
Interest of relatives - spouse holds key pos
CPA perform non-attest serv - self review, advocacy of client
Staff working on engagement
anyone influenced by attest engagement
partner in office in which partner primarily practices
Partners or managers that provide specified amt of nonattest service
public accounting firm and its employees benefit plan
any entity covered by one of the above
Consulting Services Prohibited by the Sarbanes Oxley Act
- Financial system designs and implementation
- Appraisal or valuation systems
- Internal audit outsourcing
- Management or HR services
- Investment services
- Legal services and expert services
Integrity and Objectivity(R of C)
- Rule 102
- Applies to all members
General Standards (R of C)
- Rule 201
- apply to all CPA services
- Professional competence
- due professional care
- planning and supervision
- sufficient relevant data
Compliance with standards (R of C)
- ASB (accounting standards board)
- MCSEC (management consulting services committee)
- ARSC (accounting and review services committee)
Accounting Principles (R of C)
Confidential Client Information (R of C)
- Rule 301
- Confidential but not privileged
- cannot discuss legal acts unless legal duty to do so
Allowable Contingent Fees (R of C)
- Rule 302
- Allowable for clients if none of following is done:
- audit or review of FIN STMNT
Acts Discreditable (R of C)
- Client record must be returned
Client records prepared by firm should be given to client unless not paid or incomplete
Supporting records (adj journals) should be given to client unless not paid or incomplete
CPA working papers are property of firm unless required by law to give to firm
Advertising (R of C)
- Rule 502
- May advertise as long as not false or misleading
Commissions (R of C)
Allowable commissions must be disclosed
Form of organization and name (R of C)
- Rule 505
- Can practice in any legal business form
- allow fictitious names as long as not false or misleading
IIA Code of Ethics Principles
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