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148 Cards in this Set
- Front
- Back
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7 characteristics of a profession
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1) specialized body of knowledge
2) recognized formal education process 3) standard of professional qualifications 4) standard of conduct governing the practitioner’s relationships 5) recognition of status 6) acceptance of social responsibility 7) organization devoted to the advancement of social obligation of the group |
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characteristic of specialized body of knowledge
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– passing the CPA exam
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characteristic of recognized formal education process
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– CPE and 150 hour undergrad requirement
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characteristic of standard of professional qualifications
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– group determines eligibility through meeting qualifications and members expelled if standards unmet
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characteristic of standard of conduct governing the practitioner’s relationships
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– AICPA’s code of professional conduct
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characteristic of recognition of status
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– holding oneself out to the public as CPA
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characteristic of acceptance of social responsibility
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– integrity, objectivity, and due professional care
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characteristic of organization devoted to the advancement of social obligation of the group
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– AICPA promotes social obligation by creating rules of conduct
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Professional designations available to accounting professionals
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1) CPA
2) CMA/CFM 3) CIA 4) CFE |
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CIA
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Certified Internal Auditor – Bachelors degree, four parts of exam, 2 years work experience in field
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CPA
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– issued by each state, education requirement, pass CPA exam, complete work experience
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CMA/CFM
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Certified Mgt Accountant/Certified Financial Mgr- education requirement (be a CPA, Bachelors, or GMAT score), pass four parts of exam, member of IMA, employed in field, two character references
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CFE
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Certified Fraud Examiner - Bachelors degree, four parts of exam, 2 years work experience in “related” field
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The problems in ethics would include
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the goals, where do morals come from, are morals objective or subjective, and can morals be taught
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Goals of ethics include
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the purpose of life, how should people live, what is happiness, what are duties, what is fairness, and how does this effect politics
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Possibilities of where ethics come from
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are god (divine command theory), reason (human ability to comprehend), common benefit (rich versus poor analysis involved), or maybe no one knows
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absolute morals
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the same across cultures, religions, times, and geographies.
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objective morals
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we could all understand them
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Ethical writers occurred earlier than
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500 bc in India and China, but western ethics (European) didn’t adopt these concepts
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The Greeks, in Athens, defined western ethics
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character or custom (morals)
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_____ was the first philosopher, but since he didn’t write anything
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Plato, the ethics we examine are like the footnotes of his concepts
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Aristotle focused on ___. He decided ____ is the goal, ___ is the method, and ___ is part of ____.
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what should be the goal of life in a man dominated society (reason)...happiness...virtue...morality...virtue.
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Aristotle was known as the philosopher of ___
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common sense
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Aristotles most famous book was
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Nochomachian Ethics” (city he was born in)
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Aristotle says virtue is ___
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the golden mean (goldilocks) by compromising the good with the bad.
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Epicureans emphasized
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pleasure
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Stoics emphasized ___ and ___
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deprivation, harmony with nature
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Cicero wrote a famous book
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On the Good Life’ emphasizing the purpose of life
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Marcus Aurelius was
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(old Roman emporer in the beginning of Gladiator movie) spoke from a life of a ruler and was influenced by the Stoics
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5) After the Roman empire was destroyed, Christian theory was
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divine command w/clear sense of morals-god, bible, church. Emphasis of duties
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Augustine was a ___ in ___
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christian, 400 AD
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A big change from Aristotle to Christian authors was
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emphasis of duties because Aristotle wanted a happy life for rulers while Christians lived in a new poor/weak world and emphasized duties to God, to the church, and to other people
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Aquinas rediscovered ____ in ___
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Aristotle’s teachings in the 1200’s, questioning the current Christian concepts against them.
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6) Hume, and Englishman in the ___ believed ethics should be based on ___
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1700’s...feelings/pity/empathy
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Jean Jacques Rousseau believed that society
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corrupted people.
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Even though Rousseau valued ____, he ___
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valued romanticism and emotions, he didn’t take care of his family which means he didn’t live what he preached.
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___, a German in the 1700's, lived during the _____ and was called the _____
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Kant.......“the big guy on ethics”
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Kant's two books are
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“Critique of Pure Reason” (GSWOMP) and “Metaphysics of Ethics”
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Kant said we know ethics by ____, based on ____
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reason, not God, and can be learned through awareness...Deontology
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Categorical imperatives” are
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absolute commands of reason (treat people as ends, not as means and the intent is important, not the result)
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The difference between Christian theology and Kant's theory was
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the source - rational versus revelation
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Jefferson, Madison, Franklin, etc created our bill of rights based on peoples’ entitlement of rights mimicking the thinkings of
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Kant
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______ came about in England in the 1800's in rebellion to Kant's duty based teachings, people wanted to ______
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Utilitatianism...enjoy life
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Utilitarianism occured with the rise of the ____, they wanted _____ and emphasized ______ instead of intent
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The rise of the middle class and medicine were occurring where they wanted “the greatest happiness to the greatest number of people”. Emphasize common good/maximum benefits/results instead of just intent
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______ focused on pure math (quantitative) instead of the value of people (ie. Lynching is ok if most people agree).
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Bentham
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_____ injected “quality” of happiness to balance out Bentham (ie. The one being lynched is in more pain than the majority).
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Mill
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Bentham and Mill existed in the ____'s and practiced ____
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1800's...Utilitarianism
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Nietzsche was called the ____,____,_____ the
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“immoralist”,Existentialists, Nihilist
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Nietzsche lived in ____ in the mid ___th century
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Germany....18
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Nietzsche was a _______ and anti_____ because
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Greek professor....anti-christian...duties to protect the weak are bad for society so he divided society in “Ubermenschen” supermen and “Untermenschen” sub-human
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The Nazis adobted ______ theory 30 yrs after his death, calling people ______ and ______
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“Ubermenschen” supermen and “Untermenschen” sub-human
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God is dead” implicates that
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only people living in caves would still be a Christian because the strong/successful should decide how everyone should act. This was a time of Darwinism’s evolution theory that the strong survive and the weak perish
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____ predicted his writings were the history of the 20th century, suffered nervous breakdown from watching a horse being beat, and died insane
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Nietzsche
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10) Contemporary ethics mixes Aristotle's _____/____, Kant's _______ Utilitarianists _____ ____, and Nietzshe's ____/___
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happiness/virtue...reason-derived duties...common good...Nihilism/selfishness
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3 current issues in ethics
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Biomedical – treatment costs versus societies needs, prolonged life
2) Business – wages, globalization, economic theories 3) Others – abortion, euthanasia, religion, feminism, sexual ethics, animal rights |
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Biomedical current issue deals with
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treatment costs versus societies needs, prolonged life
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Business current issues include
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wages, globalization, economic theories
feminism, sexual ethics, animal rights |
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Other current issues in ethics include
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abortion, euthanasia, religion
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The AICPA Code of Professional conduct Section 51..
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Preamble-this voluntary AICPA membership, we must assume an obligation of self-discipline greater than those of laws and regulations.
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The AICPA Code of Professional conduct Section 52..
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Responsibilities – Sensitive professional judgement is required in ALL activities, whether professional or personal in nature
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The AICPA Code of Professional conduct Section 53..
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Public Interest – obligation to act in the public’s interest, honor the public’s trust, and demonstrate commitment to professionalism.
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The AICPA Code of Professional conduct Section 54..
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Integrity – highest sense in order to maintain and broaden public confidence. Being free of conflicts of interest and not knowingly misrepresenting facts is a necessity. One exception is being able to represent your client in tax matters since the IRS represents the government and this creates a balance.
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The definition of integrity is
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adherence to moral and ethical principles, sound moral character, and honesty.
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Objectivity is
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not being affected by personal feelings or prejudice, based on facts, and unbias.
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The AICPA Code of Professional conduct Section 55..
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Objectivity and Independence – Must be free of any conflicts of interest and independent in fact AND appearance when performing attest services (F/S audits, reviews, or other services).
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Independence of mind involves the
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CPA’s own view of exercising objectivity and professional skepticism.
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Independence in appearance is the
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third parties view of circumstances.
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A covered member can be one of 6 things:
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someone on the attest engagement team, personal influential over team, partner/manager providing >10 hours of nonattest services to attest client, partner in same office of lead attest partner, the firm including the firm’s benefit plan, or an entity whose operating, financial, or control policies can be controlled by anyone else listed above.
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AICPA section 56...
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Due Care – We must strive to continually improve competency. TX does this by requiring 40 hours of CPE yearly.
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AICPA section 57...
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Scope and nature of services –observe the Principles of the Code of Conduct. Therefore, if we have absolutely no knowledge or resources on a particular subject, we must not harmfully provide services on that subject.
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Texas Administrative Code
Title 22, Part 22, Chapter 501, Subchapter A, Rules 501.51-53 |
the public’s interest is more important than anyone in the CPA profession. A conflict occurs when the rules recognize first amendment rights, but that CPAs must be conservative in their advertising. Accountants employed in the private sector of accounting aren’t held to the independence standards that public practices must adhere to.
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In regards to independence, section 501.70, TX _____
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adheres and refers to all AICPA code
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With integrity and objectivity, TX
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gives further clarification on potential conflicts of interest and commissions paid
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SOX was signed into law ____ in response to ____ .
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July 30, 2002....corporate and accounting scandals
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SOX was the biggest reform since ____
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the Securities and Exchange Acts of the 1930’s.
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_____ was a whistleblower that _____
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Wigand....exposed Big Tobacco scandal revealing that executives knew they were addictive while approving the addition of known carcinogenic ingredients (Russell Crowe – The Insider).
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Prior to SOX, there were many laws for ____
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protection including federal discrimination laws, Whistleblower Protection Act for government employees, military protection act enforced by Dpt of Defense Inspector General, and states can create their own.
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An employee must report illegal acts to ___
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proper gvt or law-enforcement agency.
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In _____ & ____, Judge Murray ruled that day to day operations were _____ driven instead of in consideration of _____
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E&Y & Peoplesoft....profit...independence
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SOX bans auditors from certain _____, requires auditors get approval from _____, mandates rotation of in-charge and concurring partners to every ___ years, and requires ___ year time out before auditor is employable by audit client.
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nonaudit services to audit clients, requires auditors the rep-approval from audit committee for providing allowed nonaudit services, mandates rotation of in-charge and concurring partners to every five years, and requires time-out period for member of audit engagement team before employed by audit client.
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Oak Industries had ____ _____ reserves which overbooked their _______ and _____ to build a reserve over time.
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rainy day....allowance for doubtful accounts and bad debt expense
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When Oak Industries finally used their rainy day reserves, they ____ stated income
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over
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Oak Industry's CEO was banned from serving in any ____ firms for claiming the ____ defense
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public...good soldier
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E&Y was banned from accepting new audit clients for ___ months after their violation in ____
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6 months...April, 2004
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T/F One characteristics of a profession is that the members have a specialized body of knowledge
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True
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T/F One example of a formalized education process for the accounting profession is the need for Continuing Professional Education hours required of CPAs
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True
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T/F Having a standard of conduct with respect to the relationship between a practitioner and their clients is a characteristic of any profession
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True
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T/F Recognition of status is another characteristic of any profession
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True
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T/F A candidate must meet certain educational requirements before they are able to sit for the CPA examination in Texas.
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True
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T/F Acceptance of Social Responsibility inherent in an occupation endowed with the public interest is a characteristic of a profession.
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True
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T/F The AICPA is an example of an organization devoted to the advancement of the social obligation of the accounting profession
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True
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T/F Passing the CMA examination is the only requirement needed in order to become a Certified Management Accountant.
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False- education requirement (be a CPA, Bachelors, or GMAT score), pass four parts of exam, member of IMA, employed in field, two character references
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T/F The CIA (Certified Internal Auditor) examination is a multi-part examination.
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True
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T/F In order to become a Certified Fraud Examiner, you must complete work experience in that, or a related, field
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True
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T/F Ethics concerns the purpose of moral behavior.
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True
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T/F An important question in Ethics is how we can know what is and is not ethical.
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True
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T/F Classical Greek philosophy is essentially irrelevant to ethical studies
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False-2) The Greeks, in Athens, defined western ethics as character or custom (morals). Plato was the first philosopher, but since he didn’t write anything, the ethics we examine are like the footnotes of his concepts.
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T/F Aristotle’s teachings on ethics addressed how people might attain such things as happiness and virtue.
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True
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T/F Kant’s “deontology” concerned a duty-based ethical system
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True
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T/F Nietzsche favored religious teachings, and drew from them an acute need to care for poor and disadvantaged persons, in his ethical teachings
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False-“God is dead” implicates that only people living in caves would still be a Christian because the strong/successful should decide how everyone should act.
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T/F All of the ethical rules that govern businesses and accounting are set forth in books and compilations of specific ethical rules, which can be read and applied whenever an ethical question is presented.
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False-ethics is subjective (Particular to a given person; personal)
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T/F The Enron, Arthur Andersen, WorldCom and other scandals have triggered increased interest in the ethical duties of business and accounting.
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True
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T/F Businesses and accountants owe ethical and other duties to “stakeholders” as well as to stockholders.
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True
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T/F Employees, customers, lenders, the government, the media and activists may all be “stakeholders” interested in a business’ decisions.
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True
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T/F Before its bankruptcy in late 2001, Enron was one of the most respected, and seemingly one of the most successful, of U.S. businesses.
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True
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T/F Arthur Andersen was convicted of criminal fraud in connection with its auditing of Enron’s financial statements.
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False-criminal obstruction of justice for illegal shredding
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T/F In terms of stockholder equity lost, WorldCom was a slightly smaller scandal than Enron.
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False-176 billion lost in equity for worldcom vs. 66 billion enron
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T/F The Sarbanes Oxley Act established the Public Company Accounting Oversight Board (“PCAOB”), which regulates aspects of the accounting profession
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True
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T/F Enron made extensive use of so-called Special Purpose Entities (“SPEs”) to engage in “off-balance sheet” transactions.
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True
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T/F In 2002, Arthur Andersen was convicted of crominal document shredding in connection with its shredding of Enron-related documents.
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True
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T/F Among the accounting errors and/or falsehoods at WorldCom was the improper capitalizing of huge expenses, resulting in large overstatements of earnings.
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True
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T/F The Sarbanes Oxley Act specified new rules for the expensing of stock options, a contentious issue throughout the 1990s.
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False-SOX replaces self-governance with PCAOB
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T/F The AICPA's Code of Professional Conduct set standards of conduct for CPAs in both their professional life and their personal life
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True
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T/F The rule of independence only requires that a CPA be independent in fact.
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False-and appearance
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T/F Since litigation support services do not involve the general public, they are not covered by the rules of professional conduct.
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False-Rule 101-6 Independence
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T/F Contingent fees can be charged in all tax matters
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False-prohibited if the arrangement involves certain attest clients, even if not related to the service
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T/F The rule of independence requires that a CPA be independent both in fact and in appearance.
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True
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T/F The private life of a CPA is of no concern to the accounting profession
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False-Responsibilities: exercise sensitive professional and moral judgement in ALL activities
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T/F The rules of professional conduct do not apply to advertising services
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False-TX Preamble: advertising cannot be transmitted to the public in a misleading fashion
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T/F Under the rules of professional conduct, the term "Financial Statements" includes accompanying notes
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True
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T/F When considering the rules of independence, a mother-in-law is considered as part of the immediate family
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False-spouse/or equivalent and dependents are immediate family
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T/F Under the rules of independence, a CPA is considered a covered member if the CPA provides more than 10 hours of tax assistance to the client.
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True
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T/F If an attest client offers employment to an individual who is a member of the attest engagement team, there is no problem with independence as long as the employee does not accept the employment.
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False-if on attest team, must immediately report to appropriate person in your firm. cannot participate in engagement until negotiations end.
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T/F CPAs are allowed to perform internal audit assistance and will be considered to the be independent if the CPA has the authority to make decisions without the clients approval
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False-In essence, any time you are able to make management decisions on behalf of a client or exercise authority over a client's operations or business affairs, independence is impaired
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T/F A CPA firm is not considered as independent if a partner or professional employee owns more than 5% of the client’s outstanding equity securities
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True
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T/F The Texas State Board of Public Accountancy has adopted the AICPA rules for independence.
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True
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T/F For covered members their immediate family only includes their spouse and dependents
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True
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T/F A covered member may accept gifts from a client, as long as the gift does not have value of over $1,000
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False-can accept gifts from client if clearly insignificant
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T/F When one has objectivity he/she is not affected by personal feelings or prejudice
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True
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T/F Integrity is measured in terms of what is right and just.
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True
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T/F In tax practice, a CPA must be totally objective in resolving doubts and should not favor the client’s position over the government’s position
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False-TX code: in tax can resolve doubt in favor of client as long as tax position complies with circular 230 and AICPA statement of standards for tax services
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T/F Objectivity could be impaired if a member provides tax services for several members of a family who may have opposing interests
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True
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T/F When one has integrity, he/she adheres to moral and ethical principles, has sound moral character and is honest.
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True
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T/F Integrity requires that one be honest even if it requires that confidential information is released to a third party without the consent of the client
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False-AICPA Rule 301:Rule 301 [ET section 301.01] prohibits a member in public practice from disclosing any confidential client information without the specific consent of the client. The rule provides that it shall not be construed to prohibit the review of a member's professional practice under AICPA or state CPA society authorization.
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T/F There is a conflict of interest if a CPA performs litigation services for the plaintiff in connection with a lawsuit against a client of the CPA
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True
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T/F If a CPA fails to correct an entity's financial statement or records that are materially false and misleading when he or she has the authority to record an entry correcting the statement, the CPA has violated the rule relating to integrity and objectivity
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True
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T/F The Sarbanes-Oxley Act was signed into law in 2002
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True
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T/F A whistleblower is an employee, former employee, or member of an organization, especially a business or government agency, who reports misconduct to people or entities that have the power and presumed willingness to take corrective action
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True
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T/F Remedies of employees who file a whistleblower complaint under Section 806 of Sarbanes-Oxley include: relief “to make the employee whole”, compensatory damages (same job back, back pay, special damages as result of action
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True
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T/F Prior to the Sarbanes-Oxley Act of 2002, CPAs could provide audit and consulting services to clients
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True
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T/F The Sarbanes-Oxley Act of 2002 states that an audit partner can only provide services, in a partner role, to a client for 12 years
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False-5 years
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T/F Oak Industries overstated bad debt expenses in order to smooth earnings in future years.
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True
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T/F “Rainy-day reserves” occur to prevent a company from going bankrupt
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False-smooth earnings
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T/F A judge decided that Ernst & Young did violate independence rules with respect to Peoplesoft
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True
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T/F E&Y's largest punishment was $1.7 million in fees from the Proplesoft audit.
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False-April 16, 2004 ruling passed to suspend firm from accepting new public company audit clients for 6 months
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T/F Oak Industries overstated their allowance for bad debts in early years, and then reversed that allowance in later ones
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True
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T/F The SEC investigated Oak Industries and ordered that they restate their financial statements for the period discussed
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True
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