Other Ethics Codes Flashcards
To which of the following firms may the PriceCooperHouse (PCH) accounting firm provide actuarial services consistent with SOX rules?
An auditor may offer actuarial services to both a private company even though it is an audit client and to a public company that is not an audit client without running afoul of SOX rules.
A person identified as an audit committee financial expert of an issuer generally must have acquired the attributes of a financial expert through any of the following experiences, except
Serving on at least one other issuer’s audit committee or disclosure committee of the board of directors.
According to SEC rules promulgated pursuant to Section 407 of SOX, serving on two audit committees at once does not mean that the person is a financial expert. He or she might have been a professional bowler (only) before taking the two positions.
Sue’s firm was hired to audit a Reno County project that used federal grant money to attempt to create jobs for people on welfare. Sue was in charge of the audit, and her team found many questionable practices. When the chief administrator of Reno County’s government heard about Sue’s preliminary findings, he called her into his office and told her that her firm would lose every single audit contract it had with every single unit of Reno County government if he was not pleased with Sue’s audit report. This is an example of:
The potential impairment threat is external, stemming from the threatened firing.
A government internal audit function is presumed to be free from organizational independence impairments for reporting internally when the head of the organization
Is removed from political pressure to conduct audits objectively, without fear of political reprisal.
Under GAGAS, a government internal audit function can be presumed to be free from organizational impairments to independence for reporting internally if the head of the audit organization meets all of the following criteria: (a) is accountable to the head or deputy head of the government entity or to those charged with governance; (b) reports the audit results both to the head or deputy head of the government entity and to those charged with governance; (c) is located organizationally outside the staff or line-management function of the unit under audit; (d) has access to those charged with governance; and (e) is sufficiently removed from political pressures to conduct audits and report findings, opinions, and conclusions objectively without fear of political reprisal.
The controller of a small utility company has interviewed audit firms proposing to perform the annual audit of their employee benefit plan. According to the guidelines of the Department of Labor (DOL), the selected auditor must be
Independent for purposes of examining financial information required to be filed annually with the DOL.
DOL guidelines do require independent for such work. Although DOL independence rules differ from AICPA rules, independence is still required.
While performing certain non-audit services for an insurance company, a professional accountant is asked to recommend the appropriate accounting treatment for a weather hedge transaction. The accountant has worked with financial hedges but has no experience with weather hedges. Which of the following actions by the accountant would be in compliance with the IFAC Code of Ethics for Professional Accountants?
Agree to recommend the appropriate accounting treatment after performing sufficient research on weather hedges.
This is the best of these four options, especially since the others all involve making recommendations without having done any research. There is no independence issue here, given that the accountant is not doing any audit work.
Wang is an auditor helping to audit an employee benefit plan. Which of the following services would create independence problems for Wang if performed by members of his office for the plan?
Maintaining financial records.
Under DOL guidelines, many consulting services are permitted, but one cannot maintain independence while auditing records that one maintained in the first place.
The Chicago office of the ABC accounting firm performs the financial statement audit of Ebben Co. Assuming that the IFAC Code applies to the relationship, who among the following must comply with the Code’s rules on independence?
Ted, a retired auditor whom ABC hired to help its audit team because of his years of experience in auditing companies in Ebben Co’s line of business.
Ted is covered. An expert who functions as part of the engagement team must meet independence rules. It would be an obvious threat to compliance with fundamental principles if that were not the case.
