Advocacy, Third Party Providers, General Standards, and Accounting Principles Flashcards
MIPPS may not advocate for their attest clients?
TRUE! You are working for consumers of the audit report, gate keeper, you are in a semi-adversarial position with your client.
Members who are doing tax work or consulting work, you can advocate.
Do not comprise credibility, you have a professional duty to the TRUTH.
Use of Third-Party Service Providers Standard include:
it is okay to outsource work to TSPs, at home or abroad but it can threaten integrity or objectivity.
Mere administrative work, that’s okay.
Professional services (tax advice, attestation)- the client needs to be notified in writing. If the client objects, either don’t outsource or decline the engagement.
General Standards: Members must follow the RULES set by appropriate bodies this includes:
1) Professional competence: Undertake only the professional services that the member or firm can reasonably expect to complete with professional competence. You may have to turn away work if you don’t have the staff or ability to do the work.
2) Due professional care: Always act up to the professional standard (you don’t have to be perfect)
3) Planning and supervision: Adequately plan and supervise the performance of professional services
4) Sufficient Relevant Data: Obtain relevant data to afford a reasonable basis for concussions or recommendations in relation to any professional services performed.
Define Competence:
The member has appropriate technical qualifications and member can supervise and evaluate the quality of work performed.
If members cannot obtain necessary knowledge through additional research or consulting with experts, they should decline the engagement.
If members employ a specialist for consulting services, they should possess the ability to define the tasks and evaluate the end product (MAKE SURE THEY ARE QUALIFIED AND HAVE THE TECHNICAL SKILLS, NEVER WALK AWAY EVEN IF THEY HAVE THE TECHNICAL SKILLS, YOU NEED TO SUPERVISE)
When is it okay to depart from GAAP?
When it demonstrates that due to unusual circumstances, following GAAP would have been misleading.
Examples or circumstances: New legislation where GAAP hasn’t been amended yet , evolution of a new form of business transaction
Do not justify: An unusual degree of materiality (not good for your client) conflicting industry practice
If you depart with GAAP, what do you need to do?
1) Describe the departure
2) Describe it’s effects (compare the two numbers if you did use GAAP and those that depart)
3) Describe the reasons why compliance with the usual principle would result in a misleading statement
