Chapter 4 Code of professional conduct Flashcards
T/F a CPA is alos responsible for compliance with the rules by employees, partners, and shareholder
T
if tthreat is so sever that no safegurads can eliminate or reduce it what do you do?
the service would compromise members compliance with rules so must decide to decline, disncontineu, or resign from the enagement
what does the principal “responsibilities” in the code of professional conduct refer to ?
when you’re doing your responsibilities, you should should use sensitive professional and moral judgements in all activities
T/F the rules of conduct are enforceable?
T
what are the 3 categories of safeguards for threats to rules?
- created by profession, legislation, or regulation 2. implemented by client 3. implemented by firm
what does the principal “objectivity and independence” in the code of professional conduct refer to ?
should keep objective and be free of conflict of interest while doing responsibilities. should be independent in appearance and fact when provideing auditing or other attestation services
what is the threat to compliance with the rules “undue influence” ?
will subordinate juegement to client due to repuration or expertise, personality, attemps to coerce or exercise excessive influence. ex. if you disagree with me i wont hire you again
only members in public practice can do what?
audit financial statements
What does part 1 of the code include?
rules for members in public practice
safeguards may be applied from more than one category but itt is not possible to rely on safguards implemented by ?
the client alone
what are the 7 categories of threats to compliance with rules?
- adverse interest- wont be objective because CPAs interest is opposed to clients interest
- advocacy- CPA will promote a clients interest or position to point that objectivity or independence is compromised
- familiarity- due to long or close relationship with client, CPA will be too sympathetic to their interest or too accepting of clients work or product
- management participation- threat that CPA will take on role of client management or assume management responsiblities like when do engagement to provide nonattest services
- self interest- CPA could benefit, finanacially or otherwise from interest in or realtionship with client or people associated with client
- self review- CPA will not appropriately evaluate the results of previous judgement or service performed or supervised by CPA or individual in the CPAs firm. and they will rely on that service in forming judgement as part of another service
- undue influence- CPA will subordinate his judgement to individual associated iwth a client or any relevant 3rd party due to reputation or expertise, personality, or attempt to coerce or exercise influence over CPA
what is the threat to compliance with the rules “management participation” ?
you might take on management responsilbities for the client like when providing nonattest services. ex. they lose personallel so you help with accounting activities like authr;ozation of transactions
what is the threat to compliance with the rules “familiarity” ?
due to long or close relationship with client you become too symathetic to their interest or too accepting of their work or product
the principals indicate the professions responibilities to who? (3)
public clients professional collegages
principlals demonstate the ____ conduct of CPA while the rules of conduct demonstrate the ____ ____ of conduct by CPA
ideal minimum level
Only members in ____ _____ can audit financial statments
public practice
what does the principal “due care” in the code of professional conduct refer to ?
observe technical and ethical standards , try and improve compentence and quality of service, do responsibilities to best of your ability
T/F Members of the AICPA agree to follow the Code of Professional Conduct
T
the principasl are designed to do what? (2)
- guide members in the performance of ther professional responsiblites 2. guide members in meeting the basic requirements of ethical and professional conduct
The code of professional conduct consists of what (3)
- principles 2. rules 3. interpretations
what does the principal “the integrity” in the code of professional conduct refer to ?
to keep and expand public confidence, do all responsiblities with higest sense of integrity
what are the 6 principals in the code of professional conduct?
- responsibilities- in carrying responsibilites as professionals, should exercise sensitive professional and moral judgements in all their activities
- the public interest- members accept obligation to act in way that serves public interest, honor public trust, and demonstrate committment to professionalism
- integrity- to maintain and broaden public confidence, should perform all professional responsibilities with highest integrity
- objectivity and independence- should maintain objectivity and be free of conflicts of interest in doing professional responsibilities . should be independant in fact and appearance when providing auditing and other attestation services
- due care- should observe professions technical and ethical standards, strive to improve competence and quality of services, and do professional responsibilities to best of their ability
- scope and nature of services- member in public practice should observe principals of code of professional conduct in determining the scope and nature of services to be provided
most rules apply to all member except what and who does it apply to?
the independence rule. applys to attestation services
what does the principal “scope and nature of services” in the code of professional conduct refer to ?
should observe the principals in the code of prfessional conduct when determining the scope and nature of services to be provided
the principles of professional conduct in the code of professional conduct is applicable to ?
all members of the AICPA
when do interpretations of the rules of conduct arise?
when there are frequent questions from CPAs concerning a specific rule
what do interpreatations of the rules in the code of professional conduct address?
circumstances members may face that are threats to the compliance with the rules of conduct
what does part 2 of the code include?
rules for members in businessw
what is the threat to compliance with the rules “advocacy” ?
you promote clients interests to point that your objectivity or independence is compromised…ex. endorce clients product
what should you do if there is a situation in which there is not an interpreation of the rules? (3)
- identify threats- i if relationship or circumstance is not addressed by a rule or interpretation, evaluate if the relationship or circumstance creates a threat to following the rule 2. evaluate significance of threat- determine whether threat at accepatble level. this is acceptable level if reasonable and informed 3rd part would conclucde that threat would not compromise membres compliance with the rules 3. identify and apply safeguards- if conclude threat not acceptable level, apply safeguards to eliminate threat or reduce it to accepable level
what is the threat to compliance with the rules “self interest” ?
if you can benefit from interest in or relationship with client or people associated with client ex. if have financial interest in client and outcome of audit may affect fair value of finaicla interest
what does part 3 of the code include?
rules for all other members
what does the priciplals section of the AICPA code of conducts include ?
6 ethhical principals and a discussion of those principals
what is the threat to compliance with the rules “adverse interest”?
your interest (CPA) and the clients are different so can’t be objective
if someone does something on your behalf that is a violation if you do it …is it still a violation of the rules
yes
the principals of the code of professional conduct provide what?
the framework for the rules that govern the CPAs performance of professional responsibilities
interpretations of the rules addresses what?
many situations that may threaten compliance with the rules.
what does the principal “the public interest” in the code of professional conduct refer to ?
act in a way that will serve the public interest, honor the public trust, and show a committment to professionalism
