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21 Cards in this Set
- Front
- Back
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What is the Ethical Framework?
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It is a six step approach that is used to help identify the ethical issues and decid an appropriate course of action, using the person's own values
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What are the six steps in the ethical framework?
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1) Obtain relevant facts
2)Identify ethical issues from the facts 3)Determine who is affected by the outcome and how each person/group is affected 4)Identify alternatives available to the person who must resolve the dilemma 5)Identify the likely consequence of each alternative 6)Decide the appropriate action |
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Why is ethical conduct so important in the accounting profession?
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Because there is an expectation of a high level of professional conduct in order to maintain public confidence in the quality of service. Professionals are expected to conduct themselves at a higher level than most members of society
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What is the purpose of the AICPA code of conduct?
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It provides CPA's with general standards of ideal conduct and specific enforceable rules of conduct
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What are the four parts to the code of professional conduct?
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Principles, Rules of conduct, Interpretations of the rules of conduct, and ethical rulings
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What part of the professional conduct code is enforceable?
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The rules of conduct are enforceable
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What are the six ethical principles in the code of conduct?
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Responsibilities, The Public interest, Integrity, Objectivity and independence, Due care, Scope and nature of services
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What is Sarbanes-Oxley Act?
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It is an act that regulates the auditors of publicly traded firms
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What is independence in fact?
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It is the mental state of mind; how you think about your behavior. It exists when an audito is actually able to maintain an unbiased attitude throughout the audit
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What is independence in appearance?
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It is what somebody else thinks about your behavior. The result of others interpretations of a CPA's independence
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The PCAOB has also issued additional independence rules related to the provision of certain tax services, what are they?
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The PCAOB says you can't do taxes for corporate officers if performing the audit.
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What are a few of the prohibited services that addresses auditor independence?
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Bookkeeping and other accounting services.
Actuarial services Appraisal or valuation services Financial information systems design and implimentation Internal audit outsourcing Management of human resource functions |
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What is an audit committee and how many people usually make up a committee?
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An audit committee is a selected number of members of a company's board of directors whose responsibilities include helping auditors remain independent of management. Made up of 3-5 or as many as seven directors who are not part of company management
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What is the requriement set forth by sarbanes-oxley regarding audit committees?
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All members of the audit committee must be independent
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What is the requirement set forth by sarbanes-oxley about partner rotation?
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The lead and concurring audit partner must rotate off the audit engagement after a period of five years
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Who are the covered persons under the SEC rules of ownership interests?
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Members of audit team; firm chain of command; executives providing more than 10 hours of service; and partners in teh same office of engagement partner
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What is rule of conduct 101 set forth by the AICPA?
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INDEPENDENCE- a member in public practice shall be independent in the performance if professional services as required by standards promulgated by bodies designated by Council
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Explain direct Vs indirect financial Interest
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Direct Financial interest- Is the ownership of stock or other equity shares by members or their immediate family
Indirect Financial interest- Exists when there is a close, but not a direct, ownership relationship between the auditor and the client. (Ex. Auditor's ownership of a mutual fund) |
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When are indirect financial interests prohibited?
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Only if the amount is material to the auditor.
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Does the AICPA code permit a CPA firm to do both the bookkeeping and auditing for the same client if the client is a private company audit client?
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Yes, under three circumstances
1) Client must accept full responsibility for the financial statements 2) The CPA must not assume the role of employee or of management 3) The audit must conform to GAAS |
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What is the issue of unpaid fees regarding rule 101?
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If fees are unpaid for more than one year they are considered a loan from the auditor and therefore violates rule 101. But unpaid fees in bankruptcy do not violate the rule
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