Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
31 Cards in this Set
- Front
- Back
- 3rd side (hint)
|
THEORIES OF ETHICAL BEHAVIOR - DEFINE UTILITARIANISM
|
Recognizes that decision making involves trade-offs between the benefits and burdens of alternative actions and focuses on consequences and on individuals affected (Ex - trolley card and throwing someone in front to stop it to save everyone else)
|
19
|
|
|
THEORIES OF ETHICAL BEHAVIOR - DEFINE RIGHTS-BASED APPROACH
|
Assumes that individuals have certain rights and other individuals have a duty to respect those rights when making decision
|
19
|
|
|
THEORIES OF ETHICAL BEHAVIOR - DEFINE JUSTICE-BASED APPROACH
|
Is concerned with issues such as equity, fairness, and impartiality.
.....1. each person has a right to have the max degree of personal freedom as long as everyone else has the freedoms also, and .....2. social and economic actions should be to everyone's advantage and the benefits available to all. |
19
|
|
|
AICPA Code of Professional Conduct - PRINCIPLES
|
Ideal attitudes and behaviors - are NOT ENFORCEABLE (Responsibilities, Public Interest, Integrity, Objectivity, Due Care, and Scope and nature of services)
|
19
|
|
|
AICPA CODE OF PROFESSIONAL CONDUCT - RULES OF CONDUCT
|
Minimally acceptable standards - SPECIFICALLY ENFORCEABLE
(Independence, Integrity, and Objectivity, General Stnds and Acct Principles, Responsibilities to Clients, Responsibilities to Colleagues, Other Responsibilities and Practices) |
19
|
|
|
AICPA CODE OF PROFESSIONAL CONDUCT - INTERPRETATIONS OF RULES OF CONDUCT and RULINGS BY THE PROFESSIONAL ETHICS EXECUTIVE COMMITTEE
|
Detailed interpretations and answers to questions regarding rules of conduct - NOT SPECIFICALLY ENFORCEABLE, BUT DEPARTURES MUST BE JUSTIFIED
|
19
|
|
|
UNDER THE AICPA CODE OF PROFESSIONAL CONDUCT - OF THE PRINCIPLES, RULES, INTERPRETATIONS AND RULINGS, WHICH ARE THE MOST AUTHORITATIVE (ENFORCEABLE)?
|
1. Rules of Conduct are the MOST ENFORCEABLE (SPECIFICALLY).
2. Interpretations of the Rules of Conduct are NOT SPECIFICALLY ENFORCEABLE, but departures must be justified. 3. Principles of Prof Conduct are NOT ENFORCEABLE. |
19
|
|
|
WHO IS A COVERED MEMBER UNDER RULE 101 - INDEPENDENCE?
|
1. Anyone participating in an engagement
2. One in a position to influence the engagement 3. A partner or manager who provides nonattest services to an attest client 4. A partner in the office where engagement partner practices 5. The firm's benefit plan 6. An entity that can be controlled by any person considered a member |
19
|
|
|
WHAT DOES THE INDEPENDENCE RULE (101) MEAN?
|
A member in public practice shall be independent in the performance of professional services as required by standards promulgated by bodies designated by Council. (Fin Stmt audits, Fin Stmt reviews, Other Attest services)
|
19
|
|
|
WHAT FINANCIAL RELATIONSHIPS APPLY TO COVERED MEMBERS WHO PERFORM ATTESTATION ENGAGEMENTS (AUDITS AND REVIEWS)?
|
1. No direct financial interest
2. No material indirect financial interest 3. No material joint ventures with client, officers, directors, or shareholders 4. In Loans, normal lending practices, collateral required |
19
|
|
|
WHAT IS PERMITTED WHEN A COVERED MEMBER IS WANTING TO OBTAIN A LOAN OR CREDIT CARD?
|
LOANS ARE PERMITTED, IF:
1. Obtained prior to 2/5/01 under old rules 2. Obtained prior to the lender becoming a client 3. Loan was sold to an attest client 4. Loan was obtained before the CPA became a member 5. Loans on life insurance based on surrender value 6. Fully collateralized by cash deposits, loans, leases, etc 7. Credit cards and cash advances less than $10,000 |
19
|
|
|
UNDER RULE 101, INDEPENDENCE, WHAT ARE THE RESTRICTIONS IN REGARDS TO IMMEDIATE FAMILY MEMBERS?
|
Immediate family members (spouse, spousal equivalent, or dependent) have the same restrictions as the covered member
They cannot have: 1. a direct financial interest 2. a material indirect financial interest 3. hold a position of influence with an audit client |
19
|
|
|
UNDER RULE 101, INDEPENDENCE, WHAT ARE THE 2 MAJOR SITUATIONS WITH CLOSE RELATIVES THAT CAN IMPAIR INDEPENDENCE?
|
1. A close relative has a financial interest in the client that is material to the close relative, and the CPA participating in the engagement is aware of the interest.
2. An individual participating in the engagement has a close relative who could exercise significant influence over the financial or accounting policies of the client. |
19
|
|
|
WHAT CONSTITUTES A CLOSE RELATIVE?
|
Non-dependent children, brothers, sisters, parents, grandparents, parents-in-law, and their respective spouses.
|
19
|
|
|
WHAT IS THE RULE REGARDING HAVING A FINANCIAL INTEREST IN A NON-CLIENT WHO OWNS AN INTEREST IN A CLIENT THAT THE AUDITOR IS AUDITING?
|
This is an indirect interest. There might be an impairment of independence if you own shares in a company that owns shares in another company that you are auditing.
|
19
|
|
|
WHAT IS THE RULE ABOUT INDEPENDENCE IN LITIGATION BY MANAGEMENT ALLEGING DEFICIENCIES IN AUDIT WORK FOR THE CLIENT?
|
If there is a suit filed by management against a CPA alleging deficiencies in audit work if the auditor concluded that it is probable that such a claim will be filed, would impair independence.
|
19
|
|
|
WHAT IS THE RULE ABOUT INDEPENDENCE IN LITIGATION BY A CPA AGAINST MANAGEMENT ALLEGING MANAGEMENT FRAUD OR DECEIT?
|
This would be considered to impair independence.
|
19
|
|
|
IN RULE 101 AND RELEVANT INTERPRETATIONS, WHAT WILL CAUSE IMPAIRMENT OF INDEPENDENCE IN BUSINESS RELATIONSHIPS?
|
--CPA cannot perform a managerial or other significant role for a client's organization during the time period covered by an attest engagement.
--If a partner or professional employee leaves the firm and is employed by a client in a KEY POSITION unless a number of conditions are met. |
19
|
|
|
WHAT ARE THE 3 BASIC PRINCIPLES OF AUDITOR OBJECTIVITY AND INDEPENDENCE?
|
1. Auditor should not audit his/her own work.
2. Auditor should not function in the role of management. 3. Auditor should not serve in an advocacy role for his/her client. |
19
|
|
|
WHAT ARE THE LIMITATIONS THAT SOX IMPOSED ON HOW LONG AN AUDIT PARTNER MUST WAIT BEFORE BEING ALLOWED TO WORK FOR A FORMER CLIENT?
|
-- 5 years for lead (engagement) partner and concurring partner (5 yr cooling off period)
-- 7 years for all other partners (2 yrs off) -- Firms cannot perform an audit of a company in which an individual with financial reporting oversight responsibilities was a member of the audit engagement team during the fiscal year under audit (have to wait a year) |
19
|
|
|
WHAT IS THE INTEGRITY AND OBJECTIVITY (RULE 102) ABOUT?
|
- Remain free of conflicts of interest
- Not knowingly misrepresent facts - Do not subordinate judgments to others - Cannot knowingly make false or misleading entries in an entity's financial records. |
19
|
|
|
WHAT ARE THE GENERAL STANDARDS (RULE 202) ABOUT?
|
A member shall comply with the following standards: Professional competence, Planning and Supervision, Due Professional Care, and Sufficient Relevant Data. Noncompliance with all technical standards (ASB, SSAR, SSAE, etc), then subject to disciplinary proceedings.
|
19
|
|
|
WHAT IS THE COMPLIANCE WITH ACCOUNTING PRINCIPLES (RULE 203) ABOUT?
|
Requirement to adhere to GAAP (other other GAA method) unless it is misleading.
|
19
|
|
|
RULE 301 - CLIENT CONFIDENTIALITY
|
A member in public practice shall not disclose any confidential client information without consent from client.
|
19
|
|
|
RULE 302 - CONTINGENT FEES
|
Fees for a particular finding or outcome is not permitted for attest engagements or preparing an original or amended tax return.
|
19
|
|
|
RULE 501 - ACTS DISCREDITABLE
|
A member shall not commit an act that is discreditable to the profession
- Discrimination - Making false or misleading journal entries - Failure to meet requirements of a governmental body, commission, or regulatory body - Disclosure of CPA exam questions or answers - Personal felonies or serious misdemeanors |
19
|
|
|
RULE 502 - ADVERTISING AND SOLICITATION
|
--Advertising and solicitation of new clients IS permitted
--Advertising cannot be FALSE, MISLEADING OR DECEPTIVE. - Cannot create false or unjustified expectations of favorable results - Cannot state ability to influence 3rd parties - Cannot underestimate fees (bait and switch) |
19
|
|
|
RULE 503 - COMMISSION AND REFERRAL FEES
|
COMMISSIONS recommendations the products or services of clients or 3rd parties
- permitted for NON-attest, if disclosed - prohibited for attest engagements REFERRALS of services of CPAs - permitted for any engagement, if disclosed |
19
|
|
|
RULE 505 - FORM OF ORGANIZATION AND NAME
|
- A member may practice public accounting only in a form of organization permitted by law that conform to resolutions of Council.
- No misleading names - No designation by a firm that all members are members of the AICPA unless all CPA owners are members of the AICPA. |
19
|
|
|
WHAT AUDIT FIRMS TYPICALLY DO (INTERNALLY) TO ENSURE QUALITY CONTROL?
|
Larger international CPA firms normally develop in-house procedures to make sure everyone is in compliance with the firm's quality control system.
|
19
|
|
|
WHAT IS THE PCAOB INSPECTION PROCESS?
|
The PCAOB conducts regular inspections of public accounting firms that are required to register with the Board. These inspections focus on selected audit and quarterly review engagements and evaluate the sufficiency of the quality control system of registered firms. This is to ensure they are complying with the SOX Act, PCAOB rules, SEC rules and professional standards. If a violation is found, the PCAOB conducts a special investigation into the violation. A report is drafted and sent, then the firm has 30 days to respond. Then a final report is issued, and the firm is given 12 months to correct any violations (if fraud is not found).
|
19
|
