ACCT 407 Module B
Terms in this set (62)
Branch of philosophy which is the systematic study of reflective choice, of the standards of right and wrong by which it is to be guided, and the goods toward which it may be ultimately directed
When an individual must make a choice among alternative actions and the right choice is not absolutely clear
Ethical Problem Situation
Situation in which the choice of alternative actions affects the well-being of other persons
Written rules that make explicit some of the criteria for conduct unique to the profession. Public declaration of principled conduct and a means of facilitating enforcement of standards of conduct.
Codes of Professional Ethics
Written rules that provide guidance in addressing situations that may not be specifically available in general ethics theories
Behavior that produces the greatest good, and/or conforms to moral rules, and principles, and/or best demonstrates the virtues you value most.
Principle that directs a decision maker to act according to the requirements of an ethical rule. Maintain that a decision should be made without trying to predict whether an action will create the greatest balance of good over evil.
Principle that reason and strict duty to be consistent should govern our actions. Individuals should act only as they think everyone should act all of time.
Principle of Utilitariansim
Principle that emphasizes the consequences of action rather than following some rules. Criterion of producing the greater good is made an explicit part of the decision process.
Principle where the center of attention is the individual act as it is affected by the specific circumstances of a situation. Permits too many exceptions to well-established rules.
Principles that emphasizes the centrality of rules for ethical behavior while still maintaining the criterion of the greatest universal good. Initial question is not which action has the greatest utility but while rule.
Considers the consequences of a decision made by similar persons acting under similar circumstances. "What would happen if everyone acted in a certain way?"
Rather than a focus on following rules or weighing outcomes, this principles emphasizes the roles of one's character in the decision-making process. "What action will help me become my ideal self?"
US Securities and Exchange Commission
Purposes of (1) protecting the reliability and integrity of the financial statements of public companies and (2) promoting investor confidence in financials. Covers only public companies. SOX requires this organization to oversee the PCAOB.
Public Company Accounting Oversight Board
Set standards for public accounting firms and to oversee quality control, ethics, and independence issues for accounting professionals who audit public companies. SEC approves all proposed rules before they are final.
Professional Ethics Executive Committee
Committee of the AICPA that makes and enforces all rules of conduct for CPAs. Three parts: (1)Comprised of 6 essays: responsibilities, public interest, integrity, objectivity/independence, due care and scope/nature of services, (2)applicable rules and (3)interpretations
Statements on Standards for Attestation Engagements
Written standards that govern attestation engagements. Dealing with assertions other than financials in which some form of assurance is provided
Mental attitude and appearance that auditors are not influenced by others in making judgments and decisions
Individuals participating in the audit or attest engagement, including those who perform reviews, irrespective of their functional classification. Excludes specialists and individuals who perform only routine clerical functions.
All partners, principles, shareholders, and professional employees participating in an audit, review, or attestation engagement of an audit client. Includes all persons who consult with others on the audit engagement team during the audit, review, or attestation engagement regarding technical or industry-specific issues, transactions, or events.
Chain of Command-AICPA
Chain of Command-SEC
All persons who (1) supervise or have direct management responsibility for the audit, (2) evaluate the performance or recommend the compensation of the audit engagement partner, or (3) provide quality control or other oversight of the audit
A proprietor, shareholder, equity, or non-equity partner, or any individual who assumes the risks and benefits of firm ownership or who is held out by the firm to be the equivalent of an owner or partner
Professional employee of the firm who has either of the following responsibilies:
1) continuing responsibility for the overall planning and supervision of engagements for specified clients
2) Authority to determine that an engagement is complete subject to final partner approval
1) individual on the audit/attest engagement team
2) individual in a position to influence the audit/attest engagement
3) partner in office in which lead audit/attest engagement partner primarily practices
4) firm, including the firm's employee benefit plan
5) an entity whose operating, financial, or accounting policies can be controlled by any of the individuals/entities described in 1-4
1) Individual on the audit engagement team
2) Individual in the chain of command
3) Any other partner, principal, or shareholder from an office of the accounting firm in which the lead audit engagement partner primarily practices in connection with the audit
Close Family Member-AICPA
Parent, sibling, or non-dependent child
Close Family Member-SEC
Person's spouse, spousal equivalent, parent, dependent child, non-dependent child or sibling
Immediate Family Member-AICPA
Spouse, spousal equivalent or dependent (whether or not related)
Immediate Family Member-SEC
Person's spouse, spousal equivalent,or dependents
CPAs having a close or longstanding relationship with a client
Adverse Interest Threat
CPAs acting in opposition to clients
Undue Interest Threat
Attempts to coerce or otherwise influence the CPA member
CPAs reviewing their own work
Financial Self-Interest Threat
CPAs having a financial relationship with a client
Management Participation Threat
CPAs taking on the role of client management or otherwise performing management functions
CPAs promoting a client's interest or position
Loans that were obtained either (1) before the independence rules changed or (2) from a financial institution before it became a client for services requiring independence.
Rule 102:Objectivity and Integrity
In the performance of any professional service, a member shall maintain objectivity and integrity, shall be free of conflicts of interests, and shall not knowingly misrepresent facts or subordinate his or her judgment to others.
Conflicts of Interest
Need to avoid having business interest in which the accountant's personal financial relationships or the accountant's relationships with other clients might tempt the accountant to fail to serve the best interest of a client or to the public.
Rule 201:General Standards
A member shall comply with the following standards and with any interpretations thereof by bodies designated by Council:
1) Professional Competence, 2) Due Professional Care, 3) Planning and Supervision, 4) Sufficient Relevant Data
Undertake only those professional services that the member or the member's firm can reasonably expect to be completed with professionalism
Due Professional Care
Exercise this in the performance of professional services
Planning and Supervision
Adequately plan and supervise the performance of professional services
Sufficient Relevant Data
Obtain sufficient relevant data to afford a reasonable basis for conclusions or recommendations in relation to any professional services performed
Rule 202: Compliance with Standards
A member who performs auditing, review, compilation, management consulting, tax, or other professional services shall comply with standards promulgated by bodies designated by Council
Rule 203: Accounting Principles
A member shall not (1) express an opinion or state affirmatively that the financial statements or other financial data of any entity are presented in conformity with GAAP or (2) state that he or she is not aware of any material modifications that should be made to stuch statements or data
Rule 301: Confidential Client Information
A member in public practice shall not disclose any confidential information without the specific consent of the client
Any information that is not available to the public (or in the public domain)
Information that cannot even be demanded by a court
Holders of the Privilege
People who can waive the privileged information such as client, patient, or penitent
Rule 302: Contingent Fees
A member in public practice shall not:
1) perform any professional services for, or receive such a fee from, a client for whom the member of the member's firm performs an audit, a compilation of a financials or an examination of prospective financials
2) prepare an original or amended tax return or claim for a tax refund
Fee established for the performance of any service in an arrangement in which no fee will be charged unless a specific finding or result is attained or the fee otherwise depends on the result of the service
Rule 501: Acts Discreditable
A member shall not commit an act discreditable to the profession
Rule 502: Advertising and Other Forms of Solicitation
A member in public practice shall not seek to obtain clients by advertising or other forms of solicitation in a manner that is false, misleading, or deceptive. Solicitation by the use of coercion, overreaching, or harassing conduct is prohibited
Consists of messages designed to attract business that are broadcast widely to an undifferentiated audience
Generally refers to direct contact with a specific potential client. Prohibits extreme bad behavior.
Rule 503: Commissions and Referral Fees
A. Prohibited Commissions
B. Disclosure of Permitted Commissions
C. Referral Fees
Generally defined as a percentage-based fee charged for professional services in connection with executing a transaction or performing some other business activity
Fees a CPA receives for recommending another CPA's services or a CPA pays to obtain a client.
Rule 505: Form of Organization and Name
A member may practice public accounting only in a form of organization permitted by law or regulation whose characteristics conform to resolutions of Council. A member shall not practice public accounting under a firm name that is misleading.
Quality control reviews and disciplinary actions conducted by fellow CPAs