Professional Responsibilities Flashcards
Principles Articles
AICPA Code of Professional Conduct
I. Responsibilities: practice sensitive professional and moral judgement.
II. Public Interest
III. Integrity: measured in terms or what is right or just, requires a member to observe principles of (a) objectivity (b) independence and (c) due care
IV. Objectivity and Independence: objectivity - impartial, intellectually honest, free of conflicts of interest. independence - precludes relationships that may appear to impair objectivity
V. Due care: observe the profession’s technical and ethical standards, strive to improve competence
VI. Scope and Nature of Services: have in place appropriate internal quality control procedures, assess whether activities are consistent with a role as professionals.
Threats to Independence
Self review threat: reviewing evidence that results from the member’s own work
advocacy threat: actions promoting the client’s interest or positions
adverse interest threat: actions or interests between the member and client that are in opposition
familiarity threat: close or longstanding relationship
undue influence threat: attempts by clients management to coerce the member
financial self-interest threat: potential benefit to a member from a financial interest
Management participation threat: performing management functions for the client
Safegaurds Against Threats to Independence
- safeguards created by the profession, legislation or regulation (required continuing education)
- Safeguards implemented by the client (effective governance structure)
- Safeguards implemented by the firm (quality controls)
Generally Accepted Auditing Standards
Measures of the quality of the auditor’s performance
Expulsion from the AICPA
Immediate expulsion may result from
- being convicted of a felony
- filing a fraudulent personal tax return
- filing a fraudulent tax return for a client
Contingent Fees
Allowed when representing a client in an IRS or State Tax review
Public Company Accounting Oversight Board
a) 5 members: 2 prior CPAs, 3 non CPA’s
b) enforce compliance with professional standards, securities laws and audits
c) performs investigations and disciplinary proceedings on registered public accounting firms
Sarbanes-Oxley Act of 2002
registered public accounting firms must
a) have second partner review and approve each audit report
b) report on an audit of internal control in addition to the audit of the financial statements of issuers.
Covered Member
a) an individual on the attest engagement team
b) an individual in a position to influence the attest engagement
c) a partner or manager who provides nonattest services to the attest clients,
- begins ten hours of nonattest services has been provided
- ends on the later of the date the financial statements were signed , or he or she no longer provides ten or more hours of nonattest services on a recurring basis
d) a partner in the office in which the lead attest engagement partner primarily practices
e) the firm, including the firms employee benefit plans
f) an entity whose operating, financial or accounting policies can be controlled by an of the individuals or entities described above, or two or more of such individuals or entities if they act together
Fraud
intentional act by one or more individuals among management, those charged with governance, employees, or third parties, involving the use of deception that result in a misstatement in financial statements that are subject of an audit.
Intentional Misstatement
1) misstatements arising from fraudulent financial reporting
2) misstatements arising from misappropriation of assets
Independence
a) of mind: state of mind that permits the performance of an attest service without being affected by influences that compromise professional judgement, thereby allowing an individual to act with integrity and exercise objectivity and professional skepticism
b) in appearance: the avoidance of circumstances that would cause a reasonable and informed third party, having knowledge of all relevant information, including safeguards applied, to reasonably conclude that the integrity, objectivity, or professional skepticism of a firm or a member of the attest engagement team had been compromised.
International Accounting Standards Board
Independent, privately funded accounting standard-setter that is committed to developing a single set of high-quality, understandable, and enforceable global accounting standards.
International Auditing and Assurance Standards Board
committee of the International Federation of Accountants established to issue standards on auditing and reporting practices to improve the degree of uniformity of auditing practices and related services throughout the world
International Federation of Accountants
worldwide organization of national accounting bodies established to help foster a coordinated worldwide accounting profession with harmonized standards.
