Other Ethics Codes

Question 1

In the event the American Institute of Certified Public Accountants rules conflict with the Public Company Accounting Oversight Board rules, which rule should the practitioner follow?

Answer 1

The Public Company Accounting Oversight Board (PCAOB)

Question 2

What does the acronym PCAOB stand for?

Answer 2

Public Company Accounting Oversight Board

Question 3

List the services that CPAs may not provide to public company audit clients.

Answer 3

• Bookkeeping or other services related to the accounting records of financial statements;
• Financial information systems design and implementations;
• Appraisal or valuation services, fairness opinions, or contributions-in-kind reports;
• Actuarial services;
• Internal audit outsourcing services;
• Management functions or human resources;
• Broker or dealer, investment adviser, or investment banking services;
• Legal services and expert services unrelated to audit.

Question 4

Is a public company required to rotate audit firms?

Answer 4

Sarbanes-Oxley does not require a public company to rotate audit firms.

Question 5

Who must be rotated under Sarbanes Oxley?

Answer 5

• Lead audit partner and reviewing partner (5-on/5-off);
• Other partners playing a significant role (7-on/2-off).

Question 6

For what type of service is compensation prohibited for auditors of public companies?

Answer 6

Compensation for selling nonaudit services is prohibited.

Question 7

Who hires, compensates, and fires auditors of public companies?

Answer 7

The audit committee (composed entirely of independent directors) performs these actions.

Question 8

On what firms must the Public Company Accounting Oversight Board (PCAOB) perform annual audits?

Answer 8

Firms with 100 or more public company audits.

Question 9

List the standards that the Public Company Accounting Oversight Board (PCAOB) is responsible for establishing.

Answer 9

Auditing Quality Control Ethics Independence

Question 10

List the Public Company Accounting Oversight Board’s basic functions.

Answer 10

1. Registering public accounting firms
2. Setting up standards
3. Inspecting public accounting firms Investigating violations
4. Enforcing compliance

Question 11

What governmental body oversees the Public Company Accounting Oversight Board (PCAOB)?

Answer 11

The Securities and Exchange Commission (SEC)

Question 12

What does the acronym GAO stand for?

Answer 12

Government Accountability Office

Question 13

What audits do the Government Accountability Office guidelines apply to?

Answer 13

Audits of:

1. Government entities
2. Entities that receive government grants

Question 14

What general issues do the Government Accountability Office address?

Answer 14

• Independence
• Ethical Principles
  
  • Public Interest
  • Integrity
  • Objectivity
• Proper use of government information, resources & position
• Professional Behavior

Question 15

What does the acronym AO stand for?

Answer 15

Auditing Organization

Question 16

List the types of audit impairments that are the focus of the Government Accountability Office.

Answer 16

1. Personal Impairments
2. External Impairments
3. Organizational Impairments

Question 17

What requirements does the Government Accountability Office outline regarding the assessing of impact that nonaudit services have on the audit?

Answer 17

Auditing Organizations (AOs) must not provide nonaudit services that involve performing management functions or making management decisions; and AOs must not audit their own work or provide nonaudit services in cases where the nonaudit services are significant to the subject matter of the audit.

Question 18

What two primary independence concerns do the Department of Labor independence rules address?

Answer 18

Financial ties; Employment ties

Question 19

What does the acronym EBSA stand for?

Answer 19

Employee Benefits Security Administration

Question 20

What does the acronym ERISA stand for?

Answer 20

Employee Retirement Income Security Act

Question 21

What does the acronym DOL stand for?

Answer 21

Department of Labor

Question 22

What does the acronym IESBA stand for?

Answer 22

International Ethics Standards Board for Accountants

Question 23

List two types of safeguards against threats to Independence.

Answer 23

• Created by profession, legislation or regulation
• Present in the workplace
  
  • Firm-wide
  • Engagement-specific

Question 24

List the categories of threats to independence outlined in the International Federation of Accountants (IFAC) code.

Answer 24

1. Self-Interest Threats
2. Self-Review Threats
3. Advocacy Threats
4. Familiarity Threats
5. Intimidation Threats

Question 25

Define “clearly insignificant” as defined in the International Federation of Accountants (IFAC) code.

Answer 25

Trivial and Inconsequential

Question 26

List the fundamental principles of the International Federation of Accountants (IFAC) code.

Answer 26

1. Integrity
2. Objectivity
3. Professional Competence
4. Due Care
5. Confidentiality
6. Professional Behavior

Question 27

What does the acronym PABS stand for?

Answer 27

Professional Accountants in Business

Question 28

What does the acronym PAPPS stand for?

Answer 28

Professional Accountants in Public Practice

Question 29

Is the International Federation of Accountants Code (IFAC) rules-based?

Answer 29

No, the International Federation of Accountants Code is principles-based.

Question 30

What is the role of the Professional Ethics Executive Committee (PEEC)?

Answer 30

The Professional Ethics Executive Committee monitors the International Federation of Accountants’ activities and gives the U.S. input to International Ethics Standards Board for Accountants (IESBA).

Question 31

How many countries have adopted the International Federation of Accountants code?

Answer 31

Over 100 countries have adopted this code.

Question 32

What is the role of the International Federation of Accountants?

Answer 32

It is the global voice for accounting profession.

Question 33

What does the acronym IFAC stand for?

Answer 33

International Federation of Accountants