Ethics & Professional Responsibilities Flashcards
Audit of Non-Issuers - Standard
Generally Accepted Auditing Standards (GAAS) issued by AIPCA
Audit of Non-Issuers - Code of Conduct
AICPA Code of Professional Conduct
Audit of Issuers - Standard
PCAOB Auditing Standards and GAAS
Audit of Issuers - Code of Conduct
AICPA Code of Professional Conduct
Securities Exchange Commission (SEC)
Sarbanes-Oxley Act (SOX)
International Audits - Standard
International Standards on Auditing (ISA)
International Audits - Code of Conduct
IESBA Code of Conduct
Governmental Audits - Standard
Generally Accepted Government Auditing Standards (GAGAS)
Governmental Audits - Code of Conduct
AICPA Code of Professional Conduct
Attestation Engagements - Standard
Statements on Standards for Attestation Engagements (SSAEs)
Attestation Engagements - Code of Conduct
AICPA Code of Professional Conduct
Accounting & Review Services - Standard
Statements on Standards for Accounting and Review Services (SSARs)
Accounting & Review Services - Code of Conduct
AICPA Code of Professional Conduct
Sets ethical standards for CPAs and provides a framework for resolving ethical dilemmas
AICPA Code of Professional Conduct
Designed to ensure that CPAs carry out their duties with professionalism, integrity, objectivity, and in the best interests of the public
AICPA Code of Professional Conduct
AICPA Code of Professional Conduct applies to which members?
Members in Public Practice
Members in Business
All Other Members
Integrity & Objectivity applies to which type of AICPA member?
Members in Public Practice
Members in Business
All Other Members
Independence applies to which type of AICPA member?
Members in Public Practice
General Standards applies to which type of AICPA member?
Members in Public Practice
Members in Business
Compliance with Standards Rule applies to which type of AICPA member?
Members in Public Practice
Members in Business
Accounting Principles Rule applies to which type of AICPA member?
Members in Public Practice
Members in Business
Confidentiality applies to which type of AICPA member?
Members in Public Practice
Contingent Fees applies to which type of AICPA member?
Members in Public Practice
Commission & Referral Fees applies to which type of AICPA member?
Members in Public Practic
Advertising & Other Solicitation applies to which type of AICPA member?
Members in Public Practice
Forms of Practices and Names applies to which type of AICPA member?
Members in Public Practice
Discreditable Acts applies to which type of AICPA member?
Members in Public Practice
Members in Business
All Other Members
Integrity & Objectivity implies…
Honesty
No conflict of interest
Free from bias
Impartiality
No misrepresentation of facts
Auditor’s judgment
Do Audits of Financial Statements of Issuers (PCAOB AS) require independence?
Yes
Do Audits of Financial Statements on Non-Issuers (GAAS) require independence?
Yes
Do Audits of Interim Financial Statements (PCAOB AS / GAAS) require independence?
Yes
Do Governmental Audits require independence?
Yes
Do Examination (SSAE) engagements require independence?
Yes
Do Review (SSAE) engagements require independence?
Yes
Do Agreed-Upon Procedures (SSAE) engagements require independence?
Yes
Do Review Services (SSARs) engagements require independence?
Yes
Do Consulting Services engagements require independence?
No
Do Tax Services engagements require independence?
No
Do Valuation Services engagements require independence?
No
Do Accounting Services engagements require independence?
No
Do Bookkeeping Services engagements require independence?
No
Do Training Services engagements require independence?
No
Do Preparation Engagement (SSARs) require independence?
No
Do Compilation Engagement (SSARs) require independence?
No
Audit Firm
Covered Member
Audit Team
Covered Member
All Partners of the Audit Firm Office / Members with an Influencing Position in the Firm
Covered Member
Firm Members providing more than 10 hours of Non-Attest Services to a client
Covered Member
Employee Benefit Plans of the Audit Firm
Covered Member
Immediate family of Covered Members includes…
Spouse
Related Dependents
Unrelated Dependents
Close relatives of Covered Members includes…
Parents
Sibling
Non-dependent child
Duration of independence
Sustained from the date the engagement letter is signed until the professional relationship’s termination
Threat where a member will not act with objectivity because the member’s interest are opposed to the client’s interests.
Adverse Independence Threat (Threat to Independence)
Threat when a member promotes or supports a client’s interests or positions to such an extent that the member’s objectivity or independence is compromised.
Advocacy Threat (Threat to Independence)
Threat when a member becomes overly sympathetic to the client’s interests of excessively accepting of the client’s work or products, which may jeopardize their objectivity.
Familiarity Threat (Threat to Independence)
Threat when a member takes on the role of client management or assumes management responsibilities.
Management Participation Threat (Threat to Independence)
Threat arises when a member (e.g. auditor) could benefit, either financially or in some other manner, from an interest in, or relationship with, a client or persons associated with the client.
Self-Interest Threat (Threat to Independence)
Threat arises when a member is required to evaluate the results of a previous judgment made or service performed by them, or supervised by them.
Self-Review Threat (Threat to Independence)
Threat arises when a member’s judgment is subordinated or compromised due to external pressures, coercion, or influences.
Undue Influence Threat (Threat to Independence)
What are profession-based safeguards against threats to independence?
Code of Conduct
Continuing Professional Education
Legislation
What are client-based safeguards against threats to independence?
Corporate governance structures
Internal audit function
Policies on hiring audit firm personnel
What are audit firm based safeguards against threats to independence?
Quality control standards
Peer reviews
Rotation of audit partners
Policies to limit non-audit services to audit clients
What is a direct financial relationship?
Owning stocks
General partnership in partnership interest
What is an indirect financial relationship?
Shares in mutual funds
Limited partnership interest
Does a material direct financial relationship by a covered member (except close relatives) impair independence?
Yes
Does an immaterial direct financial relationship by a covered member (except close relatives) impair independence?
Yes
Does a material direct financial relationship by a close relative impair independence?
Yes
Does an immaterial direct financial relationship by a close relative impair independence?
No
Does a material indirect financial relationship by a covered member (except close relatives) impair independence?
Yes
Does an immaterial indirect financial relationship by a covered member (except close relatives) impair independence?
No
Does a material indirect financial relationship by a close relative impair independence?
Yes
Does an immaterial indirect financial relationship by a close relative impair independence?
No
Is independence impaired when a member, their firm, or a close relative, have a loan or guarantee to/from an audit client?
Yes
Do loans that are grandfathered impair independence?
No
Do loans that are in accordance with market terms and conditions impair independence?
No
Do loans that are fully collateralized impair independence?
No
Does credit card debt with balances up to $10,000 per month impair independence?
No
Do FDIC insured checking accounts impaired independence?
No
Is independence impaired by gifts?
Depends on the value of the gift.
What are the General Standards of the AICPA Code of Professional Conduct?
Professional competence
Due professional care
Planning and supervision
Sufficient relevant data
Third-party provider
What are the exceptions to the Confidentiality rules?
Investigations and inquiries
Quality reviews
Subpoena or Court orders
What type of Contingent Fees are allowed?
Fees fixed by courts
Representing in tax cases
What services are not allowed to have Contingent fees?
Audit or Review
Attestation services
Review & Compilation
Preparing tax returns
For what type of client are commission & referral fees allowed and not allowed?
Allowed - non-attest client
Not allowed - attest client
What type of advertising is not allowed?
False
Misleading
Deceptive
Cannot claim a guaranteed refund
What types of acts are considered discreditable to the profession?
Discrimination
Negligence in work
Withholding client records
Violation of confidentiality
Fraudulent marketing
Solicitation and disclosure of CPA exam questions
What established the PCAOB?
Sarbanes-Oxley Act 2002
Who must register with the PCAOB?
Auditors of issuers
Which board is empowered to establish and adopt standards relating to auditing, attestation, quality control, ethics, and independence of auditors of public companies?
PCAOB
According to the PCAOB, how long must audit working papers and related documentation be retained?
Seven years
How often must firms auditing more than 100 issuers be inspected by the PCAOB?
Annually
How often must firms auditing less than 100 issuers be inspected by the PCAOB?
Once every three years
Are foreign accounting firms that audit U.S. public companies subject to the rules and regulations established by the PCAOB?
Yes
According to the PCAOB, how often must the key audit personnel rotate on an audit?
Lead (primary) audit partner and the concurring (review) partner must rotate off the audit engagement every 5 years.
Who oversees the PCAOB?
The SEC has oversight and enforcement authority over the PCAOB.
Who has authority to issue sanctions?
SEC
Who establishes specific requirements to ensure CPAs who audit Employee Benefit Plans are independent and free from any conflicts of interest?
Department of Labor (DOL)
What agency is an independent, non-partisan agency that works for the U.S. congress?
Governmental accountability office (GAO)
What is the primary function of the governmental accountability office (GAO)?
To audit federal agencies to ensure effective, efficient, and transparent use of public funds.
Who investigates how the federal government spends taxpayer dollars?
Governmental accountability office (GAO)
