Class 18 Keeping the Profession Professional

Question 1

Which of the following is an essential feature that makes a profession?

a) extensive training
b) provision of important services to society
c) training and skills largely intellectual in character
d) all of the above

Answer 1

d) all of the above

Question 2

True or false.

One source of ethical guidance is in the from of GAAP or GAAS, as set forth by standard setters (e.g. IFAC, PCAOB, FASB, etc.).

Answer 2

True

Question 3

Are codes of conduct a source of ethical guidance?

Answer 3

YES

Question 4

What is the purpose of professional codes of conduct?

Answer 4

Provide guidance about conduct expected of members so that…

• services offered will be of acceptable quality
• clients and public will not be harmed
• reputation of profession will not be sullied

Question 5

Is it feasible to have a rule for everything?

Answer 5

NO

- Codes of conduct need to blend fundamental principles w/ limited number of specific rules

Question 6

What is the typical framework for a code of conduct for professional accountants?

Answer 6

1) Intro and purpose
2) Fundamental principles and standards
3) General rules
4) Specific rules
5) Discipline
6) Interpretations of rules

Question 7

For professional accountants, what is the most fundamental principle to follow?

Answer 7

• Serve the public interest

Question 8

Define public interest

Answer 8

Collective well-being of the community of people and institutions the professional accountant serves

Question 9

In public accounting, we tend to reject which ethical paradigm?

Answer 9

EGOISM

Question 10

In public accounting, why do we tend to reject egoism?

Answer 10

As a CPA, we have duties to the firm, client, and ultimately the public

Question 11

True or false.

Another fundamental principle in the codes of conduct of professional accountants is to perform with (1) integrity, (2) objectivity and independence, (3) professional competence, due care, and professional skepticism, and (4) blab to everyone about everything.

Answer 11

False.

(4) Confidentiality

Question 12

Which fundamental principle requires a professional accountant to be straightforward and honest in all professional and business relationships?

Answer 12

Integrity

Question 13

Which fundamental principle requires a professional accountant to not allow bias, conflict of interest or undue influence of others to override professional or business judgements?

Answer 13

Objectivity

Question 14

Which fundamental principle requires a professional accountant to have a continuing duty to maintain professional knowledge and skill at the level required to ensure that a client or employer receives competent professional service?

Answer 14

Professional competence

Question 15

Which fundamental principle requires a professional accountant to act diligently and in accordance with applicable technical and professional standards when providing professional services?

Answer 15

Due Care

Question 16

Which fundamental principle requires a professional accountant to comply with relevant laws and regulations and to avoid any action that discredits the profession?

Answer 16

Professional behavior

Question 17

Which fundamental principle requires a professional accountant to respect the confidentiality of info acquired as a result of professional business relationships?

Answer 17

Confidentiality

Question 18

Are sanctions public?

Answer 18

YES

Question 19

Are ancillary orders for community work and financial report a possible sanction for unethical behavior of professionals under professional accounting codes of conduct and regulatory authorities?

Answer 19

YES

Question 20

What does IFAC stand for?

Answer 20

Int’l Federation of Accountants

Question 21

How and why do Texas state rules complement and overlap the AICPA Code of Professional Conduct?

Answer 21

• All about independence and how to conduct yourself as a professional
• Interests are aligned and therefore emphasize similar principles
• State rules reference GAAP

Question 22

How and why do Texas state rules supersede the AICPA Code of Professional Conduct?

Answer 22

• AICPA = voluntary professional association, not a licensing authority (but the state is)
• State codes often go beyond the AICPA Code (“Discreditable Acts” = catch-all for those who didn’t violate specific rule)

Question 23

How and why do Texas state rules get superseded by the AICPA Code of Professional Conduct?

Answer 23

• To the extent that state rules reference standards by AICPA rules

Question 24

Why did the SEC ban certain non-audit services from being offered to SEC registrant audit clients even though it has been possible to effectively manage such conflict of interest situations?

Answer 24

• Faced w/ the inability of AA to resist the lure of profit and protect the public interest
• And the fact that such conflicts were common practice
• So SOX required SEC to eliminate the most problematic conflicting services

Question 25

If the provision of management advisory services an create conflicts of interest, why are audit firms still offering them?

Answer 25

• B/c they are lucrative services that benefit their clients w/o compromising the auditor’s objectivity

Question 26

If an auditor’s fee is paid from the client company, isn’t there a conflict of interest that may lead to a lack of objectivity?

Answer 26

YES

• This is a normal practice that could give management an opportunity to influence the judgement of the auditor
• However, existence of BOD audit committees lessen the chance for undue influence to occur (mandated by SOX/SEC)

Question 27

Who was the guest speaker from EY that talked about professionalism, duties to the public, duties to the client, and independence?

Answer 27

Wayne Ebersberger