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AUD > 1 - I: MIPPs Non-independence Rules > Flashcards

1 - I: MIPPs Non-independence Rules Flashcards

1
Q

What are the four major parts of Code?

A

Preface - applies to everyone.
Part 1: Members in public practice.
Prat 2: Members in business.
Part 3: Other members.

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2
Q

What are the supplements for principles and rules of conduct?

A

Interpretations.
Definitions.
Applications.
Other standards by bodies such as CPA societies, SEC, PCAOB, GAO..

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3
Q

What are the six principles of professional conduct?

A

Responsibilities principle, Public interest principle, Integrity principle, Objectivity and independence principle, Due care principle, Scope and nature of service principle.

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4
Q

Responsibilities principle: What are three things should members cooperate to?

A
  1. Members should exercise sensitive professional and moral judgments.
  2. Improve the art of accounting.
  3. Maintain the public confidence, carry out the profession’s special responsibilities for self governance.
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5
Q

Explain public interest principle. what is the distinguishing mark of a profession?

A

Members should accept the obligation in a way that will serve the public interest, honor the public trust, and demonstrate a commitment to professionalism.
Acceptance of its responsibility to the public.

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6
Q

Explain integrity principle. How is integrity measured? What should a member ask?

A

To maintain and broaden public confidence, members should perform all professional responsibilities with the highest sense of integrity.
In terms of what is right and just.
“Am I doing what a person of integrity would do?”

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7
Q

Explain objectivity and independence principle. What are the three characteristics of objectivity?

A

A member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities. should be independent in fact and appearance when providing auditing and other attestation services.
Impartiality, intellectual honesty, freedom from conflicts of interest.

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8
Q

Explain due care principle. What are three things entailed for competence. Duce care?

A

Should observe the profession’s technical and ethical standards, strive continually to improve competence and the quality of services, and discharge professional responsibility to the best of the member’s ability.
C: continued learning, research, consultation with experts.
D: Adequate planning engagements, supervision of professional activities.

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9
Q

What are three things should a member do at a minimum for scope and nature of services principle?

A

Practice with good quality control procedures.
Use individual judgment for conflict of interest.
Individually assess if an activity is consistent with their role as professionals.

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10
Q

What are the ranges of definitions does the Code include?

A

Acceptable level to threats.

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11
Q

What are the four structure of the Code?

A

Principles, rules of conduct, interpretations of the rules, other guidance

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12
Q

What are the three steps for applying conceptual framework?

A

Identify threats, evaluate the significance of the threats (acceptable level?), identify and apply safeguards.

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13
Q

What are the seven types of threats?

A

Adverse interest threats (adverse interest between you and clients), advocacy threats (you advocate client in law suit), familiarity threats (family employed), management participation threats (you on client management role), self-interest threats (you have financial interest in client’s firm), self-review threats, undue influence threats (threaten you to make desirable result for clients)

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14
Q

What is the threat to?

A

Integrity and objectivity

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15
Q

What are the three safeguards?

A

Safeguards created by the profession, legislation, or regulations.
Implemented by the client.
Implemented by the firm.

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16
Q

What are two ways threats to objectivity can be reduce to an acceptable level?

A

Full disclosure to the client.

The client’s consents.

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17
Q

Is objectivity threatened when one serves as a consultant to the board? What about when joined?

A

No.

Yes.

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18
Q

Objectivity and integrity are threatened if MIPPS receive gifts or entertainment from who?

A

Client, officers, directors, 10% shareholders.

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19
Q

A violation is presumed when?

A

If gifts/entertainment violate the ember’s or client’s policies, applicable laws and regulations.
The member knows of violation or is reckless in not knowing.

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20
Q

When can gifts/entertainment can be received?

A

Reasonable in circumstances.

Nature, occasion, cost/value, whether it was a part of conducting business

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21
Q

Violation occurred in reporting income when?

A

Made, permitted, directed another to make materially false/misleading entries.
Failed to correct materially false/misleading entries when had the authority to record the entries.
Signed, permitted or directed another to sign a document with materially false/misleading info.

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22
Q

What are the steps for proper procedure in case of subordinate judgment?

A
  1. Evaluate the significance of the threat: material misrepresentation (not significant: ok) will lead to violation of applicable laws or regulations.
  2. If significant, discuss with the superior.
  3. Go over the superior’s head.
  4. Invoke safeguards: Determine if there are additional requirements for reporting difference of opinion and whether she is responsible for communication to third parties (authority, external accountant).
    Consult legal counsel.
    Document.
    Consider quitting (does not relieve you from legal liability to report to authority).
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23
Q

Can MIPPS advocate for their attest clients?

A

No.

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24
Q

Can MIPPS advocate if they provide advisory and tax services?

A

Yes, but should not threaten objectivity or integrity by stretching the bounds of performance standards or going beyond sound reasonable professional practice or compromising credibility.

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25
Q

Can outsourcing work to TSP (Third party service provider) threaten compliance with integrity and objectivity rules? What about outsourcing administrative work?

A

Yes.

No.

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26
Q

What must be done when professional services are outsourced? When must it be done?

A

Clients should be informed preferably in writing.

Before any confidential information is provided to TPS.

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27
Q

What are four general standards?

A

Professional competence, due professional care, planning and supervision, sufficient relevant data.

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28
Q

What are two key points for competence?

A

Appropriate technical qualifications.

Ability to supervise/evaluate quality of work performed.

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29
Q

What must you do when you can’t obtain necessary knowledge through additional research or consulting experts?

A

Decline the engagement.

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30
Q

What must you be able to do when employing a specialist?

A

Ability to define the tasks and evaluate the end product.

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31
Q

What are two key points when using a TSP?

A

Ensure TSP’s qualification/ability.

Plan and supervise.

32
Q

When would departure from GAAP be appropriate?

A

When member can demonstrate following GAAP will be misleading due to unusual circumstances.

33
Q

What are three things you must describe when departing from GAAP?

A

The departure.
Approximate effects.
Reasons why following GAAP would have been misleading.

34
Q

What are two settings that might justify a departure from GAAP?

A

New legislation.

Evolution of a new form of business transaction.

35
Q

Is removing client files or proprietary info from a firm after termination discreditable act?

A

Yes.

36
Q

Can a member use confidential info if it was obtained from a prospective client or nonclient without consent?

A

No. It’s discreditable act.

37
Q

What are the four categories of records?

A

Client-provided records.
Member-prepared records.
Member’s work products.
Working paper (member and client provided. ex: audit documentation).

38
Q

What do you have to do with client provided records if requested? when client hasn’t paid yet?

A

Return for both.

39
Q

With member-prepared records? When client hasn’t paid yet?

A

Return.

Don’t have to.

40
Q

With work products? What are four exceptions?

A

Deliver.
Fees are due.
The work is incomplete.
To comply with professional standards (withholding an audit report because of unresolved audit issues).
If threatened or outstanding litigation exists re: the engagement.

41
Q

With working papers? An exception?

A

No, it’s your property.

When some regulation or contractual provision requires production.

42
Q

What should you do when state laws are more demanding of accountants?

A

Deliver regardless of fees due.

43
Q

What’s the time frame for honoring the request?

A

45 days.

44
Q

Do you have to comply when a client asks the form in an electronic format when you have it only in a paper form?

A

No.

45
Q

When is contingent fees not allowed? What are three services?

A

When MIPP performs any attest services.
An audit or review of a financial stmt.
A compilation of a financial stmt when a third party will use it and it doesn’t disclose a lack of independence.
An examination of prospective financial info.

46
Q

Is contingent fee allowed for tax related services?

A

No even if no attest work is performed.

47
Q

When is contingent fees for tax related service permitted?

A

In cases there is high likelihood that the service will be audited/reviewed by authority.

48
Q

Is contingent fees allowed when filing an amendment due to the error caused by you?

A

No.

49
Q

When are referral fees and commission fees prohibited?

A

For attest clients.

50
Q

What is the requirement for referral fees and commission fees for non attest clients?

A

Disclosure.

51
Q

Can a member’s spouse receive commission from the member’s attest client? What are rules?

A

Yes, as long as two are separate activities and the member is not significantly involved in the spouse’s activity.

52
Q

What are two exceptions for commissions / referral fees disclosure requirement?

A

Member taking the title to the product and risks of ownership.
Member subcontracting the service.

53
Q

Is the member responsible for the third party who is advertising for them?

A

Yes

54
Q

Promotional efforts are considered false, misleading, or deceptive if; (3 cases)

A

Create false or unjustified expectations of favorable results.
Imply the ability to influence any court or regulatory agency.
Claim that services will be performed for a stated fee when it’s likely that it will be substantially increased.

55
Q

What’s the general rule of confidential info?

A

Can’t disclose without consent.

56
Q

Is the member responsible for staff regarding confidential info?

A

Yes.

57
Q

Does a member have to abide in confidential info rule after leaving the employment? Even if you are fired unjustly?

A

Yes. Yes.

58
Q

What are four exceptions to confidentiality rule?

A

Initiate ethics complaint with AICPA, other authority.
Protect the member’s professional interests in legal proceedings.
Comply with professional standards/ethics requirements.
Report potential concerns to employer’s confidential complaint hotline or those charged with governance.

59
Q

Is disclosure permitted when it’s on behalf of the employer? When?

A

Yes.
Obtain financing with lenders.
Communicate with vender, clients, customers.
Communicate with the employer’s external accountant, attorneys, regulators, other business professionals.

60
Q

What must a member do when accepting a new client that would likely lead to disclosure of confidential info from other identifiable clients?

A

Obtain informed consent from the previous client.

61
Q

What must a member do when being contacted from a firm who took on a client you withdraw from due to suspicious practices?

A

Suggest to the firm to obtain permission from the client to discuss all matters freely.

62
Q

What must a member do when both spouse who are involved in a divorce are his clients and ask you opposite requests?

A

Seek legal guidance.

63
Q

What must a member do before outsourcing work to TSPs regarding confidentiality?

A

Enter into a contract to maintain confidentiality and provide reasonable assurance that the TSP has procedures in place.
Or obtain specific consent from the client for the disclosure.

64
Q

Is disclosure of clients’ name permissible? Any exceptions?

A

Yes.

When the disclosure will signal the client’s confidential info.

65
Q

Can a name of a firm be misleading?

A

No.

66
Q

Can names of one or more past owners maybe included in the firm’s name?

A

Yes.

67
Q

Can a firm designate itself as members of the AICPA when the majority of members are?

A

No. Must be all.

68
Q

Can a member own an interest in a separate business that provides attest service?

A

No.

69
Q

When the owners/professional employees must comply with the Code regarding ownership of a separate business?

A

When the member controls the business.

70
Q

Can a partner equivalent call him a partner?

A

No.

71
Q

Can two former partners may continue attest engagement?

If yes, whats the rule?

A

Yes.

Must use plain paper to present their report.

72
Q

What does a network share to be a network? (5)

A

Common control, profits/costs, common business strategy, significant portion of professional resources, common quality control policies and procedures.

73
Q

If Firm A and B are in the same net work, must A be independent of B’s attest client? Exception?

A

Yes.

Except when use of the audit or review report is restricted.

74
Q

Does Code allow alternative dispute resolution provision in engagement letter?

A

Yes.

75
Q

Who are not covered by the Code regarding independence from gifts received?

A

Other partners in the office and 10-hour people.

76
Q

Can an auditor make disbursements on plan’s behalf when it’s an attest client?

A

No.

AUD (24 decks)

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