Professional Responsibilities and Ethics Flashcards
direct financial interest
ownership of any equity interest, being a debtor to, or a creditor of a client
material indirect financial interest
holding an equity interest, being a debtor to, or a creditor of a client through some means other than direct ownership, such as owning a material interest in an investment fund that holds a material equity interest in the client
attest service
a service performed by a CPA for a client that requires the CPA to be independent, including reviews, audits & attestation engagements (i.e. examinations, reviews and agreed-upon procedures engagements)
nonattest services
services that do not require the CPA to be independent, including compilation and preparation engagements, tax services, consulting services & bookkeeping services
confidentiality
a CPA’s duty not to disclose info about the client w/o the client’s permission, except in certain circumstances, such as in response to a valid subpoena, peer review or an AICPA trial board
workpapers
an auditor’s documentation that describes the work performed, the evidence obtained and the conclusions drawn to support the auditor’s report. they are confidential info. they are required to be maintained by the auditor for at least 7 yrs under PCAOB requirements and 5 yrs under GAAS
more likely than not standard
a greater than 50% likelihood that a tax position will be sustained in an audit on the basis of its merits
substantial authority standard
approx. 40% likelihood that a tax position will be sustained on the basis of its merits
realistic possibility standard
approx. 33% likelihood that a tax position will be sustained on the basis of its merits
reasonable basis standard
approx. 20% likelihood that a tax position will be sustained on the basis of its merits
confidentiality exceptions
confidentiality of client info & working papers must normally be maintained, however, exceptions include:
- valid subpoena
- IRS administrative subpoena
- court order (except in rare states w/ privilege statue)
- quality control or peer review request from PCAOB or other accountants
- when seeking counsel from an attorney or assisting a liability insurance carrier’s defense of the CPA against an actual or potential claim
public company accounting oversight board (PCAOB)
created by SOX to oversee the audits of public companies & other issuers of publicly traded securities
private securities litigation reform act of 1995
designed to limit frivolous lawsuits, it imposes requirements to include audit tests to detect related-party transactions, illegal acts and going concern doubts (RIG)
securities & exchange commission (SEC)
govt agency responsible for enforcing federal securities laws, established to protect investors
government accountability office (GAO)
govt agency responsible for investigating how the federal govt spends taxpayer money and to ensure the accountability of the federal govt
generally accepted government auditing standards (GAGAS)
standards established by the GAO, also called the “yellow book”, for auditors performing govt financial and performance audits
federal
relating to the central govt as distinguished from the separate units that constitute a federation
also relates to a system of govt in which several states form a unity but remain dependent in internal affairs
