AUD 6.08B - AICPA Code of Professional Conduct
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What is included in the integrity and objectivity rule and who is covered by this rule?
- Free of conflicts of interest
- Not knowingly misrepresent facts or subordinate his judgment to others
- Covers the CPA, the firm, and the firm’s employees
What is included in the general standards rule and who is covered by this rule?
- Professional competence: knowledge or ability to obtain knowledge of technical subject matters
- Due professional care: the member possess the same degree of skill commonly possessed by others in the field
- Planning and Supervision: critically review work done by others
- Sufficient Relevant Data: obtain
What is included in the compliance with standards rule?
Follow all the other approved add-on standards, such as GAGAS
What is included in the accounting principles rule?
- In general GAAP should be followed except
- when compliance would cause the FS to be misleading.
- ** during the recognition of new legislation or forms of business transactions
What is included in the confidential client information rule, and when can this rule be exempted?
- No member can disclose any confidential information unless written permission is received from the client, except
- To honor a validly issued subpoena or summons (the CPA does not need to inform the client)
- During a quality review (peer review)
- During an investigation or disciplinary action by the state CPA board
- When requested by your legal defense team when your client is suing you
What is included in the contingent fee rule and when can this rule be exempted?
- Generally – contingent fees are not allowed
- ** when the fees are established by the courts or based on the result of court proceedings
What is included in the acts discreditable rule?
- Failure to return the client’s records (holding them hostage)
- Discrimination or harassment
- Failure to follow applicable standards
- Taking or retaining copies of client records when the employment relationship is terminated
- Disclosure of confidential information
What is included in the advertising and other forms of solicitation rule?
Advertising and solicitation is generally okay unless it is false or misleading, such as underestimating fees
True / False: Receiving a commission or referral fee will impair the CPA’s independence
True / False: A CPA can take a commission or referral fee when the CPA performs a non-attest engagement.
True because independence is not required for these services, but you must disclose receipt of the commission.
What is included in the Form of organization and name rule
- You can’t mislead using firm name or titles. Example = if claiming to be a CPA firm, all owners must be CPAs.
- The firm must be >50% ownership by CPAs. The remainder can be non-CPAs such as a lawyer.
True / False: Can the firm continue to use the name of past owners?
An ethical challenge arises that is not clearly covered in the Code of Professional Conduct’s principles, rules, or interpretations. What guidance can the CPA use to base a decision of action?
The Conceptual Framework
What is the three-step approach used in the Conceptual Framework to reduce a threat to the CPA’s ethics or conduct?
- Identify the threat to compliance
- Evaluate the significant of the threat
- Apply safeguards to reduce the threat to an acceptable level
What are the 7 types of threats to compliance with the fundamental principles of the Code of Professional Conduct and provide a brief description
- Adverse Interest: not acting with objectivity
- Advocacy: the CPA becomes compromised and begins to promote a client’s interest or position
- Familiarity: the CPA becomes too sympathetic to the client
- Management Participation: The CPA begins assuming management responsibility
- Self-Interest: the CPA could benefit financially
- Self-Review: inability to evaluate your own work
- Undue Influence: the CPA begins to subordinate his own judgment based on management’s influence
The 7 types of threats to compliance within the Conceptual Framework apply to which types of performance by members
- Members in public practice
- Members in business
How does the CPA evaluate the significance of the threat?
What would a reasonable 3rd party think about the situation?
What types of safeguards could be used to mitigate a threat to compliance with the principles of the Code of Professional Conduct
- Base your decision / behavior on the guidance provided by the profession, legislation, or regulation
- Safeguards implemented by the client
- Safeguards implemented by the firm through policies and procedures
When considering the 7 types of threats to compliance, who is the primary conflict with for the (1) member in practice, (2) member in business, (3) independence.
- (1) the client
- (2) the employer
- (3) the attest client
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