Professional Responsibilities Flashcards
Covers all professional engagements and is the minimum standard of conduct
Member should additionally follow specific standards for a specific engagement
Professional Responsibilities - Audit
Integrity
Objectivity
No Conflicts of Interest
No known misrepresentations of facts
No outsourcing of judgment
Professional Responsibilities - Audit
Safeguards > Threats - Independence
Threats > Safeguards - No Independence
Professional Responsibilities - Audit
Self-Review (Auditing own work)
Advocate of the Client
Adverse Interest (Lawsuit against Client)
Too familiar with Client - could impair the appearance of Independence to public
Undue influence on Client - On Board of Directors- exception being an Honorary board position
Professional Responsibilities - Audit
Offset the threats
Safeguards are created by Legislation (SOX)- Client (Audit Committee)- Accounting Firm (Policies)
Professional Responsibilities - Audit
On the engagement team- have Significant influence on Audit- such as:
Reviewing Partner
Managing Partner in CPA Firm
Firm Personnel who does more than 10 hours of non-attest work (Income Taxes)
Partner sharing office with another Partner who oversees an engagement
Financial Interest in Client by Covered Member (Auditor on Engagement)
Professional Responsibilities - Audit
No direct financial interest
No Material indirect financial interest
Firm personnel who are not Covered Members cannot own more than 5% of stock
Covered Member’s immediate family cannot own more than 5% of stock or be employed in Key positions. If Covered member is aware of this- it will impair independence.
Cannot make management decisions.
All requirements apply during the period of the professional engagement- and as long as they are a client.
Professional Responsibilities - Audit
If Supervisor’s position is still GAAP/GAAS- defer to Supervisor
If Supervisor’s position is not GAAP/GAAS- report to higher levels of management
If management ignores you- consider leaving the firm
Professional Responsibilities - Audit
Audit
Review
Attestation Engagement
Professional Responsibilities - Audit
Agreement must be in writing.
Independence not required - Must state if you are not independent
Applicable engagements: Consulting- Compilation
Professional Responsibilities - Audit
Consulting engagements are covered by Statements on Standards for Consulting Services (SSCS)
Requirements: Competence- Due Care- Planning- Supervision- Obtain Sufficient Data- Must Serve Client Interest- Must have written or oral agreement- must communicate with client.
Professional Responsibilities - Audit
Advisory Services
Transaction Services
Management Consulting
Implementation Services
Professional Responsibilities - Audit
Not allowed if Member also performs services where independence is required
Commissions or referral fees for Covered Members are not allowed
Example - Audit firm gets a commission for recommending to Client that they implement a new A/P System…NOT Allowed
If a firm performing non-attest work doesn’t also perform Covered Member services (aka - Independence not
required)- then Firm can get a commission on referring products/services- but they must disclose to the Client
Tax Preparation - Payment according to refund amount is disallowed
Professional Responsibilities - Audit
When fees are structured relative to judicial proceedings.
Example: IRS audit- or filing an amended tax return subject to tax case with a different taxpayer.
Professional Responsibilities - Audit
Client must carry them out - covered member cannot perform management functions.
Client must assign someone of competence to oversee the non-attest engagement and CPA must be satisfied that this has occurred.
Professional Responsibilities - Audit
