AUD 1 Flashcards
safeguards that might reduce a threat of noncompliance with the code to an acceptable level
Safeguards created by the profession, Safeguards implemented by the client and Safeguards implemented by the firm.
Key Concept in Code’s Conceptual Framework
Threats, Safeguards and acceptable level
Violations of Code of Professional Conduct
an auditor knowing about material modifications of audited financial statements and stating that they were not aware
Members may properly advocate on behalf of
Tax clients. They can be watchdogs for audit (attest) clients but not advocates.
Events that may justify a departure from a Statement of Financial Accounting Standards, according to the profession’s ethical standards
New legislation and evolution of a new form of business transaction
if client objects to outsourcing
the member should either not outsource the work or decline to provide the service altogether.
Audit Documentation ownership
Owned by the CPA (Audit) firm and would not have to turn over the documentation during a litigation during the middle of an audit
an act discreditable to the profession and violation of the profession’s ethical standards
Retaining client records after the client demands their return
Contingent fee may be accepted by auditors if
for seeking a private letter ruling
Allowing a review of professional practice without client authorization
is not in violation of professional standards regarding the confidentiality of client information by a CPA
A CPA in public practice may not disclose confidential client information regarding auditing situations without the client’s consent in response to
A letter to the client from the IRS
Firms that must have their financial interests WHOLLY owned by CPAs
firms that identify themselves as “Members of the AICPA.
Firms that must have a MAJORITY of their financial interests owned by CPAs
attest firms
Sampson is an audit partner at the QRS Accounting Firm. There is a lot of tax work to be done in her city, so she wishes to invest in R&H Square, a local accounting firm that specializes in tax preparation. Its other owners and employees are not CPAs. Which of the following is not true regarding this investment opportunity?
If Sampson is a minority owner of R&H, other employees of R&H must follow Code provisions on collection of commissions and referral fees through R&H.
SELF-REVIEW threat to independence example
ABC Auditing prepared source documents for client XYZ Co. that were ultimately audited by ABC
Example of an ADVOCACY threat to independence
ABC Auditing acted as a promoter of audit client XYZ Co.’s stock in an initial public offering (IPO)
Example of an adverse interest threat to independence
ABC Auditing’s audit partner in charge of the XYZ Co. audit learned that her spouse had been promoted from a nonmanagerial role to CFO at XYZ Co.
Covered Members
a staff member who works on the engagement for the audit firm. Could also be the partners, individual who is in position to influence the attest engagement, or the firm itself.
Independence of firms in the same network
Firm A must be independent of Firm B’s attest clients if use of the audit or review reports is unrestricted. Independence not required if reports are restricted.
Proper Inclusions of an engagement letter signed by auditor and client
The client must reimburse the auditor for any damages it pays to investors caused by its nonnegligent failure to detect fraud by client’s management
