ETHICs Flashcards
Direct Financial Interest
Ownership of any equity interest, being a debtor to, or a creditor of a client.
Material Indirect Financial Interest
Holding an equity interest, being a debtor to, or a creditor of a client through some means other than direct ownership, such as owning a material interest in an investment fund that holds a material equity interest in the client.
Attest Service
A service performed by a CPA for a client that requires the CPA to be independent, including reviews, audits, and attestation engagements (i.e., examinations, reviews, and agreed-upon procedures engagements).
Nonattest Services
Services that do not require the CPA to be independent, including compilation and preparation engagements, tax services, consulting services, and bookkeeping services.
Nonattest Services
Services that do not require the CPA to be independent, including compilation and preparation engagements, tax services, consulting services, and bookkeeping services.
Confidentiality
A CPA’s duty not to disclose information about the client without the client’s permission, except in certain circumstances, such as in response to a valid subpoena, peer review or an AICPA trial board.
Workpapers
An auditor’s documentation that describes the work performed, the evidence obtained, and the conclusions drawn to support the auditor’s report. They are confidential information. They are required to be maintained by the auditor for at least 7 years under PCAOB requirements and 5 years under GAAS.
More Likely Than Not Standard
A greater than 50% likelihood that a tax position will be sustained in an audit on the basis of its merits.
Substantial Authority Standard
Approximately 40% likelihood that a tax position will be sustained on the basis of its merits.
Realistic Possibility Standard
Approximately 33% likelihood that a tax position will be sustained on the basis of its merits.
Reasonable Basis Standard
Approximately 20% likelihood that a tax position will be sustained on the basis of its merits.
Confidentiality Exceptions
Confidentiality of client information and working papers must normally be maintained; however, exceptions include:
Valid subpoena
IRS administrative subpoena
Court order (except in rare states with privilege statute)
Quality control or peer review request from PCAOB or other accountants
When seeking counsel from an attorney or assisting a liability insurance carrier’s defense of the CPA against an actual or potential claim
Public Company Accounting Oversight Board (PCAOB)
Created by SOX to oversee the audits of public companies and other issuers of publicly traded securities.
Public Company Accounting Oversight Board (PCAOB)
Created by SOX to oversee the audits of public companies and other issuers of publicly traded securities.
Private Securities Litigation Reform Act of 1995
Designed to limit frivolous lawsuits, it imposes requirements to include audit tests to detect Related-party transactions, Illegal acts and Going concern doubts (RIG).
