Chapter 5 Flashcards
ethics
a set of moral principles or values
ethical dilemma
a situation a person faces in which a decision must be made about the appropriate behavior
independence of mind
reflects the auditor’s state of mind that permits the audit to be performed with an unbiased attitude
independence in appearance
result of others interpretation of this independence
non-audit services
prohibited non audit services for attest clients:
bookkeeping and the other accounting services
financial information systems design and implementation
appraisal or valuation services
actuarial services
internal audit outsourcing
management or human resource functions
broker or dealer or investment adviser or investment banker services
legal and expert services unrelated to the audit
any other service that the PCAOB determines by regulation is impermissable
audit committee
a selected number of a company’s board of directors whose responsibilities include helping auditors remain independent of management
one year cooling off period
auditors have to wait a year after auditing a client before they can work for that client in a managing position
partner rotation
the leading partner on an audit engagement has to rotate out every 5 years
ownership interests
ownership in audit clients is prohibited for auditors working on that client
indirect financial interest
when there is a lose but not direct ownership relationship with a client
direct financial interest
ownership of stock or other equity by immediate family
material
affects only when there is an indirect financial interest
former practitioners
former auditors can work for a prior attest client if they are retired
normal lending procedures
loans don’t change independence if they are under normal lending procedures
director, officer, management, or employee of a company
someone who is this is not independent
bookkeeping
in order to do bookkeeping the client must
- accept full responsibility of the f/s
- cpa can’t assume management role
- f/s have to be according to auditing standards
Rule 102
member shall maintain objectivity and integrity, shall be free of conflicts of interest
Rule 201 - General standards
professional competence
due professional care
planning and supervision
sufficient relevant data
Rule 202 Compliance with standards
members have to comply with bodies designated by council
Rule 203
used when following standards would be misleading
confidential client info
members shall not disclose confidential client data
exceptions to confidentiality
- obligations related to technical standards(misstatement)
- subpoena or summons and compliance with laws and regulations
- peer review
- response to ethics division(AICPA)
privileged info
if legal proceedings can’t require info
Rule 302 - contingent fees
a member shall not perform for a contingent fee any professional services for or receive such a fee from an audit client or review client, a compilation of f/s , an examination client
2. prepare an original or amended tax return or claim for a tax refund for a contingent fee for any client
Rule 501 acts discreditable
a member shall not commit an act discreditable to the profession
Rule 502 - advertising and other forms of solicitation
a member in public practice shall not seek to obtain clients by advertising or other forms of solicitation in a manner that is false, misleading, or deceptive
Rule 503 - Commissions and referral fees
a member cannot for a commission recommend or refer a client any product or service when the client is an audit client, compilation, or examination client
B. member who is permitted to refer clients - must disclose the commission
C. referral fees - must be disclosed to clients
Rule 505 - form of organization and name
member may practice accounting only in an organization that is permitted by state law
