9/16 Class Flashcards
how do we prepare for the test
review the homework problems and do the additional problems in the chapters
she will post a review sheet
AICPA standards
don’t use the archive
code of professional conduct
use this for your first case
don’t use the code of prof conduct revised
Chapter 4
Professional Ethics
CPA Responsibilities
Competent
fair to all parties not biased
independent of client
trusted third party
CPE
requirements of CPA’s to fulfill every year
standards of admission to the profession
min
education
experience
CPA
Need for public confidence
product of CPA = credibility
confidence enhancements
Peer Review
SEC & PCAOB
Legal Liability
Professional ethics
Code of Professional Conduct AICPA developed code monitors private companies PCAPB & SEC accepts code adds and modifies for public ...companies monitors public companies
Code of Professional Conduct
principles
provide overall framework - not enforceable
philosophical underpinnings
rules
govern performance of professional services
min standards - enforceable
interpretations
provide guidelines as to the …scope and application of rules
help members understand …scope - not enforceable - justify …departure
ethics ruling
summarize application of rules …and interpretations to particular …factual circumstances - not …enforceable - justify departure
published in journal of …accountancy
Ethical Principles
Preample
CPA in AICPA assumes …obligation of self discipline …above and beyond …requirements of laws and …regulations
Article 1 - Responsibilities
Integrity and Objectivity
Free of conflicts of interest
no misrepresentation of facts
applies to all professional services
General Standards
Professional competence due professional care planning and supervision obtain sufficient relevant data applies to all professional services
203 Accounting Principles
Members shall not:
express opinion that financial
PCAOB & SEC Independence
Prohibited Services bookkeeping financial Other Issues Partner rotation Answer to audit committee Post public accounting emp Internal audit outsourcing management and human resources broker dealer/investment banker legal
auditor liability
effects of auditor liability costs reputation damage reluctant to accept new audits criminally tried for malpractice
prudent person concept
people are responsible to act with reasonable care
negligence
failure to exercise degree of care that ordinary prudent person would exercise under similar circumstances
gross negligence
lack of even slight care - reckless disregard for truth and professional repsonsibilities
fraud misrepresentation
intent to deceive
privity
individual or entity in which an auditor is in contract
third party beneficiary
party outside contracting party benefiting under the contract
engagement letter
contract communicating relationship and services, time frames, fee, responsibilities, etc
proximate cause
the reason a loss was incurred
contributory negligence
plaintiff or client was partly to blame for negligence and suffered a loss
comparative negligence
allocate damages between contributory parties
common law
unwritten based on historical court decisions society’s concept of fairness
litigation against auditors
…
common law
cases/approaches used to
negligence lawsuits by clients
plaintiff must show: duty imposed(engaged) violation of duty(materially) proximate cause damages were suffered
