AICPA Final

Accountants are subject to the rules and regulations of (3)

the national professinal organization for CPAs - similar to the AMA for doctors - provide resources and information to members and coordinate activities with state CPA socieities

promulgates the AICPA code of professional conduct and sanctions members for violations(usually follows an action by the state board, the SEC, the PCAOB, the IRS, etc.)

the OSCPA in oklahoma, a statewide
organization for CPAs - provide information and resources on national and state wide issues may advocate for(or against) legislation and or regulation

encourages global adoption of high ethical standards, the AICPA is a member of this - the global ethics code is a foundation for the AICPA ethics code

Empowered by COngress to regulate financial reporting by publicly held companies- they also establish and enforce rules on accounting and auditing- including rules on auditor independence

created by passage of SOX, overseen by the SEC, they establish rules with respect to auditing and other attestation engagements, quality control of audits, and independence of public company auditors

a branch of the US treasury which is authorized by the internal revenue code to issue rules and regulations to enforce US law

Issue the rules with respect to government audits, often referred to as the Yellow Book - these include ethics and independence rules that apply to individuals and entities that carry out these audits

issue rules with respect to the auid of employee benefit plans - these include independence rules that apply to such auditors

auditors of banks, savings and loans, credit unions, and other financial institutions are subject to separate rules promulgated by entities such as

insurance is regulated by the states - audits of insurance entitites may be governed to some extent by state statutes and or rulings of state insurance commissions

issues your license, frontline of oversight on ethical behavior

state ethics codes may

to whom does the AICPA code of professional conduct apply? All members, including those in:(4)

AICPA code of professional conduct recognizes responsibility to (3)

requires responsibility more than just following the law
helps maintain public confidence in the profession
requires unswerving commitment to honorable behavior, even at personal sacrifice

rules or standards governing the conduct of members of a profession

the collective well being of the people and institutions the profession serves

six principles of AICPA Code

exercise sensitive professional and moral judgment in ALL your activities

act in a manner that:
serves the public interest
honors the public trust bestowed on you
demonstrates your commitment to professionalism

in order to maintain and broaden public confidence, you must perform all your professional responsibilities with the highest sense of this

maintain ____ and be free of conflicts of interest in discharging your professional dutites

if you work for a public accounting firms that provides audit and attestation services, you should be ______ in fact and in appearance

means that you are impartial, intellectually honest, free of conflicts of interest

means you are not involved in relationships that may appear to impair your objectivity

follow the technical and ethical standards of the profession - always try to inprove your competence - the quality of your service - carry out your professional responsibilities to the best of your ability

observe all of the preceding principles in determining the scope and nature of services that you will provide

in performing professional services, you must:
maintaining objectivity and integrity
be free of conflicts of interest
not knowingly misrepresent facts or subordinate your judgement to others

You CANNOT (3)

if you work for an entitiy that has an outside accountant or auditor -(3)

3 steps if you and your supervisor disagree about the preparation of financial statements

you must consider whether your objectivity is impaired when you offer or accept gifts or entertainment to or from: (3)

your objectivity is not considered to be impaired if the gift or entertainment is _____ in the circumstances

means that you should:
observe the technhical standards of the accounting profession
always strive to improve your competence and service quality
carry out your professional responsibilities to the best of your ability

requires you to:
do your job with competence and diligence
perforn servuces to the best of your abilities
serve the best interests of those for whom services are performed, consistent with the profession's responsibility to the public

you should NOT indicate that a company's financial information comply with ____ if they contain any departure from an accounting principle- rare exception: information departs from _____ because to do otherwise would make it misleading

exceptions when you can disclose confidential client information

acts that could harm the good name or reputation of the accouting profession - illegal acts like theft or funds or insider trading obviously come under this heading - but there are less obvious issues such as client records

if a client asks for his records back:

if the engagement isn't complete and your client asks you for his records bakc you may

if you outsource services to third party service providers you must:

Rules that only aply to CPAs in public practice

result of ethical infractions

This framework is used to set independence standards and to resolve cases where an issue is not specifically addressed.

To apply the AICPA Conceptual Framework

A _______________ is anyone in the firm who must avoid certain financial and business relationships with an attest client to maintain independence.

You're a covered member if you are in any category of persons who are presumed able to

List who would be a covered member

independence typically extends to the immediate family members of covered members. Immediate family includes

Exception to covered member family rule

generally a member of your immediate family may be employed by an attest client without impairing your independence as long as he/she does not hold a

an idividual who has primary responsibility for significan accounting functions that support material components of the financial statements
has primary responsibility for preparing the financial statement
can exercise influence over the content of the financial statements

do not rely solely on job title to determine whether an individual is in a key position look at

employment of your close relatives is subject to some restrictions if you are a covered member because you are

Close relatives include

employment of your close relatives is subject to some restrictions if you are a covered member because you are

if you're one of the specified covered members, then your independence would be impaired if one of your relatives is employed in a _____ _____ by your attest client

employment of your close relatives is subject to some restrictions if you are a covered member because you are

Independence is required when you perform

independence is not required if you perform

periods during which independence is required

independence is considered impaired if a covered member has a direct __________ _________ in an attest client
there is no _____________ threshold. Any amount impairs independence

independence is considered impaired if a covered member has a _____ _____ financial interest in an attest client
-must be material to the covered member's net worth before it is considered to impair independence
-no qualitative benchmark
-requires judgment and includes both quantitative and qualitative factors

exceptions to the investment being compared a direct financial investment

with regard to independence owning shares in a mutual fund is

If a mutual fund is diversified, owning __ or less of the outstanding shares of the fund would not be considered a material, indirect financial interest in the underlying investment

If you acquire a financial interest unexpectedly through gift or inheritance, independence is not considered impaired as long as

your accounting firm hires an individual who was formerly employed by your client what about independence?

to avoid the preceding problem, persons associated with the client must disassociate themselves before becoming a covered member by

sometimes a covered member as an investment in a non client that has a significant relationship with an attest client does this impair independence

The covered member ______ invest in a nonclient subsidiary of a client s the parent. For example if Papa co is the client company and baby co is a subsidiary of papa co, the covered member cannot invest in baby co

presumed to exist when the investor owns 20-50% of the investee

In general a covered member cannot loan money to a client or get a loan from a client. Independence is impaired by any loans to or from

With regard to independence loans that are permitted from financial institutions

Independence will not be impaired by home mortgages, unsecured loans that are not material to your net worth, and other secured loans if they meet the following condidtions

independence is or is not impaired if a covered member has a joint, closely held investment with an attest client that is material to the covered member's worth

exists if the covered member and the client individually or jointly control the investment

are prohibited from having financial interests in an attest client that consitute more than 5% of the client's outstanding equity securities

A memo or engagement letter should include

If you fail to do an engagement letter for the services with the client

In nonattest services the client must accept responsibility and

When performing non-attest services for an attest client, you may NOT do any of these things

bookkeeping services that would not impair independence

bookkeeping services that would impair independence

In some instances the covered member cannot serve as trustee of a trust or admin or executor of an estate if

Partners and professionals in the firm may not be associated with the client as

Independence is considered to be impaired if any parner or professional in the firm

may be impaired if you accept or are even considering certain employment positions with an attest client

if you assume a key position with the client there are several more steps you must take after you leave the firm in order for the firm to maintain independence:

litigation events that would likely impair independence

clause in the engagement letter indicating that the client would release you from liability and costs resulting from knowing misrepresentations by management (Does not impair independence)
The client asks you to agree to in indemnify him for the costs that relate to legal action that arises directly or indirectly from client acts(impairs independence)

you dont charge the client unless a specific result is attained or the amount of the fee depends on the results.
You may NOT have one for any professional services if you perform:
audit or review of financial statements
compilation of a financial statement when you do not disclose lack of indpendence
examination of prospective finacial statements

you may not perform any of the following for a contingent fee:

Fees aren't regarded as contingent fees:

a fee you receive for recommending someone's products or services to someone else

If you're in public practice and performing attest services for a client, you may not do any of the following for a commission

If you’re not prohibited from a commission arrangement and will be paying or receiving a referral fee or commission, you __________ _________the arrangement to the party to whom the products or services are being recommended.

if your client has not paid what he owes you

If your client is a privately-held company, you must adhere to the rules

If your client is a publicly-held company and/or an SEC registrant, then you must also adhere to the rules in addition to the rules of the AICPA and your state board

rules establish a general standard of independence and then identify particular circumstances in which independence would be considered impaired.

The SEC consideres independence impaired if

The SEC may look to four basic principles in evaluating independence in a particular situation

If there's any possibility that the client may go public follow the more-restrictive

Under SEC rules individuals who consult with the attest engagement team on techincal or industry related matters are regared as

SEC rules regard a jointly held investment as an impairment of independence regardless of

Under SEC rules LP agreements and leasing interests are

The SEC prohibits you (covered member) from having an insurance policy with the client unless:

Under SEC rules You can’t have a checking, savings, or other depository account with the client IF

Under SEC rules A broker/dealer account with the client is permitted as long as:

Under SEC rules immediate family members can have financial interest in a client through their employer retirement or other benefit plan only if

Under SEC rules close realatives include

Under SEC Rules - Employement of Close Relatives by the Client

Under SEC rules firm partners or professional employees who are subsequently employed by an attest client require a ____________________ before a former employee of the firm can be in a position of financial reporting oversight for an audit client

If the client is an SEC registrant you ________ perform the following non attest services for them: Bookkeeping–Valuation, appraisal, and actuarial services—unless solely for non-financial reporting purposes, e.g., transfer pricing for tax purposes or to help client understand methods employed by a third party.–Financial information systems design (though you can design and implement systems not at all related to financial reporting)–Human resource services (though you may interview candidates and advise the client on their competence for financial positions)–Legal services–Expert services (e.g., forensic accounting)–Internal audit services

Your independence is impaired if you provide services to an audit client that involve marketing, planning, or opining in favor of

one in which the client pays a fee to an advisor and then agrees (at the request of the advisor) not to disclose the advisor’s strategy, tax treatment, or structuring. The secrecy suggests a potentially abusive transaction

one whose significant purpose is tax avoidance. Such a transaction could cause the auditor and client to have an inappropriate shared interest.

Under SEC rules Audit firms ____________ personal tax services to members of the client’s management who are in financial reporting oversight roles, or to their immediate families.

Audit parter rotation under SEC rules
Lead and concurring partners?
Other audit partners?
exception for firms with <6 public clients and?

Under SEC rules, your independence is impaired if there is a contractual clause that releases you from liability for your own negligent acts.

The SEC may raise issues if one audit client or group of such clients provides ___ or more of the audit firm’s total revenues.

The PCAOB requires that at least annually, you must communicate to the client’s audit committee:

The firm should maintaint to documents to help you ensure your independence with auit clients

for audits involving governemental entites or government contracts

for pension plan audits

Banking regulators for audits of enitities insured by the

GAO standards apply to:

The book of GAO standards is referred to as the

The yellow book addresses five ethical principals:

Under GAO you are permitted to provide routine advice, which includes advice on:

under GAO rules you may provide

U.S. department of labor standards apply to

Under DOL covered members or 'members' include

these policies deal with such issues as corporate governance rules, internal audit outsourcing, and auditor indemnification clauses.

The following promulgate standards for tax practice

AICPA tax standards are referred to as

Members who engage in tax service is responsible to two clients

the __________ has the ultimate responsibility for the contents of the return; but the ______ is expected to exercise due diligence in preparing the return

SSTS 1: Tax return position
A tax return position is a position

You should not recommend a tax return position or prepare or sign a tax return taking a position unless you have a good-faith belief that the position has at least a ____________ ______- of being sustained administratively or judicially on its merits if challenged.

a member may _____________ if the member confludes that there is a reasonable basis for the postition and advises the taxpayer to appropriately disclose that position

a member may ______________ that reflects a position if the member concludes there is a reasonable basis for the position and the position is appropriately disclosed

When recommending position or preparing or signing a return on which a position is taken, you should advise the taxpayer regarding

You must not recommend a tax return position or prepare or sign a tax return reflecting a position that you know

Reasonable grounds that may exist for omitting an answer include the following

deals with your obligation to examine or verify certain supporting data or to consider information related to another taxpayer when preparing the return

If tax laws require that the taxpayer,____________ records, and/or substantiating documentation to support a deduction or other tax treatment, you should make appropriate inquiries to determine to your satisfaction whether that’s being done.

Unless prohibited by statute or rule, you may use a taxpayer’s estimate in the preparation of a tax return if:

–The taxpayer is not bound to the treatment.–The reason for the determination by the IRS or tax court was lack of documentation; and supporting documentation is now available.–The taxpayer yielded for settlement purposes on a position that might have been appealed.–There have since been more favorable court decisions.

For the purposes of this standard, an error includes

Upon becoming aware of any of the previously-described errors, you should:

If you’re preparing the current year’s return and the taxpayer hasn’t corrected an error in a prior year’s return consider whether to do the following:

The Internal Revenue Code imposes a penalty equal to $ or half the income derived from preparing a return (whichever is greater) if you knew or should have known that:–The tax position would not meet the standard that “more likely than not,” it would be sustained on its merits if it were challenged; or–There was a reasonable basis for the position, and the position was not disclosed.

The Internal Revenue Code imposes a penalty equal to $ or half the income derived from preparing a return (whichever is greater) if you know or are reckless in not knowing that a tax position is contrary to a rule or regulation