Aud 7 Professional Responsibilities

Front 1

Code of Professional Conduct

Back 1

(DO STIR)
1. DUE care
2. OBJECTIVITY and independence
3. SCOPE and nature of services
4. THE public interest
5. INTEGRITY
6. RESPONSIBILITIES

Front 2

Under ISAs, the auditor need not evaluate the capabilities and competence of an expert for each audit if

Back 2

the expert is employed by the audit firm

Front 3

Covered Member

Back 3

o On the engagement team
o Significant influence on Audit
 Reviewing Partner
o Managing Partner in CPA Firm
o Firm Personnel who does more than 10 hours of
non-attest work (Income Taxes)
o Partner sharing office with another Partner who
oversees an engagement
o Financial Interest in Client by Covered Member
(Auditor on Engagement)

Front 4

No Direct Financial Interest

Back 4

 Materiality doesn't matter
 Example: owning shares of stock

Front 5

When 5% or more of stock is owned by ---; independence is impaired

Back 5

Firm personnel who are not Covered Members
Covered Member's immediate family (spouse & dependents)

Front 6

Covered Member's family cannot be employed by
client in KEY positions and still remain
independent; What positions?

Back 6

 Controller
 Internal Audit
 Non-key position is ok

Front 7

When Covered Member disagrees with Supervisor

Back 7

o If Supervisor's position is still GAAP/GAAS
o Defer to Supervisor
o If Supervisor's position is not GAAP/GAAS
o Report to higher levels of management
 If management ignores you, consider
leaving the firm

Front 8

When is Independence required?

Back 8

o Audit
o Review
o Attestation Engagement

Front 9

Non-Attest Engagements

Back 9

o Agreement must be in writing
o Independence not required
o Compilation
o Must state you're not Independent
o Consulting

Front 10

Personal Financial Planning Engagements

Back 10

o Must have definite objectives
o Must have specific procedures planned
o Must have a basis for recommendations
o Must have recommendations communicated
o Must have action steps to implement

Front 11

Member may disclose confidential info when

Back 11

 Client isn't following GAAP
 Subpoena – CPAs are not Attorneys, so
there is no CPA-Client privilege

Front 12

What PCAOB

Back 12

o Monitors CPA Firms who audit SEC Clients
o All SEC Auditing Firms must register
o Issues Standards for Firms to Follow
 Initially adopted existing standards
 Subsequently amended standards
 Usually stricter than AICPA standards

Front 13

Independence is impaired if a covered member

Back 13

1. direct financial interest in client
2. has loan to/from client (except from financial institution)
3. material indirect financial interest
4. Is trustee of trust/executor of estate with direct or material indirect interest
5. material closely held investment with client
6. owns more than 5% of client
7. former employed by or associated with officer/director/manager/employee

Front 14

Types of matters to be communicated to those charged with governance

Back 14

1. Auditor's responsibilities under GAAS
2. Planned scope & timing of audit
3. Qualitative aspects of entity's significant accounting practices
4. Significant difficulties encountered during the audit
5. Any uncorrected misstatements
6. Disagreements with mgt
7. mgt's consultation with other accountants
8. Significant issues discussed with mgt
9. Independence aspects
10. Going concern issues

Front 15

Auditor to report the following to those charged with governance in regards to Sarbanes-Oxley Act of 2002

Back 15

1. All critical accounting policies and practices used
2. All material alternative treatments of financial info within GAAP discussed with mgt
3. Ramifications of use of alternative disclosures and treatments
4. Treatment preferred by auditor