AICPA Code of Professional Conduct

Question 1

what are the six major principles of AICPA code of professional conduct?

Answer 1

1. responsibilities
2. public interest
3. integrity
4. objectivity and independence
5. due care
6. scope and nature of services

Question 2

define responsibilities principle

Answer 2

major principle of aicipa code of professional conduct

-in carrying out responsibilities as professionals, members should exercise sensitive professional and moral judgment

Question 3

define public interest principle

Answer 3

major principle of aicipa code of professional conduct

• members should accept the obligation to act in a way that will
  1. serve the public interest,
  2. honor the public trust and
  3. demonstrate a commitment to professionalize

Question 4

define integrity principle

Answer 4

major principle of aicipa code of professional conduct

• to maintain and broaden public confidence, members should perform all professional responsibilites with the highest sense of integrity
• what is right and just

Question 5

define objectivity and independence principle

Answer 5

major principle of aicipa code of professional conduct

• independent in fact and appearance
• objectivity is a state of mind that requires
• -impartiality
• -intellectual honesty
• -freedom from conflict of interest

Question 6

who must be independent vs. have objectivity and integrity

Answer 6

members in public practice must act with independence and act with objectivity and integrity
everyone else must only have objectivity and integrity and not independence

Question 7

define due care principle

Answer 7

major principle of aicipa code of professional conduct

• observe profession’s technical and ethical standards
• strive continually to improve competence and the quality of services
• discharge professional responsibility to best of members ability

Question 8

what is required by competence of a aicpa member

Answer 8

continued learning

from research and consultation with experts

Question 9

due care entails…

Answer 9

• adequate planning of engagements

- supervision of professional activities for which members are responsible

Question 10

scope and nature of services principle

Answer 10

major principle of aicipa code of professional conduct
- should observe the principles of the code of professional conduct in determining the scope and nature of services to be provided

Question 11

attest engagement

Answer 11

An engagement that requires independence, as set forth in the AICPA Statements on Auditing Standards (SASs), Statements on Standards for Accounting and Review Services (SSARSs), and Statements on Standards for Attestation Engagements (SSAEs

Question 12

define close relative

Answer 12

A parent, sibling, or nondependent child.

Question 13

covered member

Answer 13

a. an individual on the attest engagement team.
b. an individual in a position to influence the attest engagement.
c. a partner, partner equivalent, or manager who provides more than 10 hours of nonattest services to the attest client within any fiscal year. Designation as covered member ends on the later of (i) the date that the firm signs the report on the financial statements for the fiscal year during which those services were provided or (ii) the date he or she no longer expects to provide 10 or more hours of nonattest services to the attest client on a recurring basis.
d. a partner or partner equivalent in the office in which the lead attest engagement partner or partner equivalent primarily practices in connection with the attest engagement.
e. the firm, including the firm’s employee benefit plans.
f. an entity whose operating, financial, or accounting policies can be controlled by any of the individuals or entities described in items a–e or two or more such individuals or entities if they act togethe

Question 14

direct financial interest

Answer 14

A financial interest that is
a. owned directly by an individual or entity, including those managed on a discretionary basis by others.
b. under the control of an individual or entity, including those managed on a discretionary basis by others.
c. beneficially owned through an investment vehicle, estate, trust, or other intermediary when the beneficiary
i. controls the intermediary or
ii. has the authority to supervise or participate in the intermediary’s investment decisions.
When used in this definition, the term control includes situations in which the covered member has the ability to exercise such control, either individually or acting together with his or her firm or other partners or professional employees of his or her firm

Question 15

financial interest

Answer 15

An ownership interest in an equity or a debt security issued by an entity, including rights and obligations to acquire such an interest and derivatives directly related to such interest.

Question 16

financial statement attest client

Answer 16

An entity whose financial statements are audited, reviewed, or compiled when the member’s compilation report does not disclose a lack of independence. This term is used in the “” interpretation

Question 17

define independence

Answer 17

Consists of two elements, defined as follows:
a. Independence of mind is the state of mind that permits a member to perform an attest service without being affected by influences that compromise professional judgment, thereby allowing an individual to act with integrity and exercise objectivity and professional skepticism.
b. Independence in appearance is the avoidance of circumstances that would cause a reasonable and informed third party who has knowledge of all relevant information, including the safeguards applied, to reasonably conclude that the integrity, objectivity, or professional skepticism of a firm or member of the attest engagement team is compromised.
This definition should not be interpreted as an absolute. For example, the phrase “without being affected by influences that compromise professional judgment” is not intended to convey that the member must be free of any and all influences that might compromise objective judgment. Instead, the member should determine whether such influences, if present, create a threat that is not at an acceptable level that a member would not act with integrity and exercise objectivity and professional skepticism in the conduct of a particular engagement or would be perceived as not being able to do so by a reasonable and informed third party with knowledge of all relevant information

Question 18

indirect financial interest

Answer 18

A financial interest beneficially owned through an investment vehicle, an estate, a trust, or an other intermediary when the beneficiary neither controls the intermediary nor has the authority to supervise or participate in the intermediary’s investment decisions. When used in this definition, control includes situations in which the covered member has the ability to exercise such control, either individually or acting together with his or her firm or other partners or professional employees of his or her firm

Question 19

joint closely held investment

Answer 19

An investment in an entity or a property by the member and client (or the client’s officers or directors or any owner who has the ability to exercise significant influence over the client) that enables them to control the entity or property.

Question 20

period of the professional engagemetn

Answer 20

The period begins when a member either signs an initial engagement letter or other agreement to perform attest services or begins to perform an attest engagement for a client, whichever is earlier. The period lasts for the entire duration of the professional relationship, which could cover many periods, and ends with the formal or informal notification, either by the member or client, of the termination of the professional relationship or by the issuance of a report, whichever is later. Accordingly, the period does not end with the issuance of a report and recommence with the beginning of the following year’s attest engagement

Question 21

third party service provider

Answer 21

All of the following:

a. An entity that the member does not control, individually or collectively with his or her firm or with members of his or her firm.
b. An individual not employed by the member who assists the member in providing professional services to clients (for example, bookkeeping, tax return preparation, consulting, or attest services, including related clerical and data entry functions)

Question 22

those charged with governance

Answer 22

The person(s) or organization(s) (for example, a corporate trustee) with responsibility for overseeing the strategic direction of the entity and the obligations related to the accountability of the entity. This includes overseeing the financial reporting process. Those charged with governance may include management personnel (for example, executive members of a governance board or an owner-manager).
When an interpretation requires communicating with those charged with governance, the member should determine the appropriate person(s) within the entity's governance structure with whom to communicate, based on the nature and importance of the particular circumstances and matter to be communicated. If the member communicates with a subgroup of those charged with governance (for example, an audit committee or an individual), the member should determine whether communication with all of those charged with governance is also necessary, so that they are adequately informed.

Question 23

threats

Answer 23

In connection with independence, threats are relationships or circumstances that could impair independence. In connection with any rule but the “” [1.200.001], threats are relationships or circumstances that could compromise a member’s compliance with the rules