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• The AICPA's Code of Professional Conduct does not require all employees to sever ties with all audit clients. For example, staff auditors not working on a particular engagement need not sever ties. In this case, the firm exceeds the minimum level of conduct for independence.
• The case does not address other ethical requirements. • The case does not mention spouses or dependents of the employees. Spouses and dependents must also be independent, as defined by Section 100--Rule 101 of the Code. In this case, the firm should strengthen its requirements.
• How does the firm meet other ethical requirements?
Acceptance and continuation of clients • This case does not address this control standard. It does note that the firm is attempting to gain more clients through an extensive marketing program.
• It is important to have many controls when considering a potential client, so that the potential risks of legal exposure are not too great. (Note: This topic is addressed in Case 2.) •
Human resources • The firm considers experience and technical competence in assigning personnel to audit …show more content…
However, the firm has room for improvement in many of the areas, particularly in the acceptance and continuation of clients.
SUGGESTED ANSWERS TO SARBANES-OXLEY QUESTIONS
(1)
Students should be encouraged to visit the PCAOB website (http://www.pcaobus.org) when answering this question:
- Registration – CPA firms must be registered to be associated with public companies. The application for registration is an online process. There is a fee, it is small relative to other costs of maintaining the registered status and changing the nature of the firm to comply with PCAOB rules. Here is the fee structure from their website:
- Inspection - The PCAOB operates a system of inspections and publicizes the results, per its authority under the SOX Act:
- The Act provides that an inspection shall include at least the following three general components:
• An inspection and review of selected audit and review engagements of the firm, performed at various offices and by various associated persons of the …show more content…
• An evaluation of the sufficiency of the quality control system of the firm, and the manner of the documentation and communication of that system by the firm; and
• Performance of such other testing of the audit, supervisory,
• The case does not address other ethical requirements. • The case does not mention spouses or dependents of the employees. Spouses and dependents must also be independent, as defined by Section 100--Rule 101 of the Code. In this case, the firm should strengthen its requirements.
• How does the firm meet other ethical requirements?
Acceptance and continuation of clients • This case does not address this control standard. It does note that the firm is attempting to gain more clients through an extensive marketing program.
• It is important to have many controls when considering a potential client, so that the potential risks of legal exposure are not too great. (Note: This topic is addressed in Case 2.) •
Human resources • The firm considers experience and technical competence in assigning personnel to audit …show more content…
However, the firm has room for improvement in many of the areas, particularly in the acceptance and continuation of clients.
SUGGESTED ANSWERS TO SARBANES-OXLEY QUESTIONS
(1)
Students should be encouraged to visit the PCAOB website (http://www.pcaobus.org) when answering this question:
- Registration – CPA firms must be registered to be associated with public companies. The application for registration is an online process. There is a fee, it is small relative to other costs of maintaining the registered status and changing the nature of the firm to comply with PCAOB rules. Here is the fee structure from their website:
- Inspection - The PCAOB operates a system of inspections and publicizes the results, per its authority under the SOX Act:
- The Act provides that an inspection shall include at least the following three general components:
• An inspection and review of selected audit and review engagements of the firm, performed at various offices and by various associated persons of the …show more content…
• An evaluation of the sufficiency of the quality control system of the firm, and the manner of the documentation and communication of that system by the firm; and
• Performance of such other testing of the audit, supervisory,