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Flashcards in 1. Professional responsibilites Deck (29):

GAO standards identify three types of impairments:

personal, external, and organizational.


Public Company Accounting Oversight Board (PCAOB) has authority to establish

attestation standards, independence standards, auditing standards, and quality control standards.


Code of professional conduct - principles

1) responsibilities - excercise sensitive professional moral judgments in all activities.
2) public interest - serving the public.
3) Integrity - To maintain and braoden public confidence.
4) Objectivity and Independence - objectivity is a state of mind.
1) objectivity imposes obligation to be impartial, honest, and fre of conflicts of interest.
2) Independence precldues relationships that may appear to impair objetivity.


What is due care?

should observe the profession's technical and ethical standards, striving to improve competence and the qualit yfo services, and discharge professional responsibility to the best of the member's ability.
1) competence is derived from both education and experience.
2) each member is responsible for assessing his or her own competence and for evaluating whethere educaiton, experiecne, and judgemnt are adegate.

Consulting with experts is part of due care but you don't have to go get speciality accreditation. be reasonable!


In using this framework, the member should identify and evaluate threats to independence. These threats include

1) self review threat
2) advocacy treat - promoting hte client's interest.
3) adverse interest threat - actions or interests etween the member and the client that are in opposition.
4) familiarity threat - memberes having a close or longstanding relationship
5) undue influence - attempts by the client's managemnet to coerce the member or exercise excessive fluence over hte member.
6) financial self-interest threat - potential benefit to a member from a financial interest in
7) management participation threat - assuming the role of management or perfomring managemnet funcitons.


A cover member in public practice is:

1) had or was committed to acquire any direct or material indirect financial interest in the client.
2) Was a trustee of any trust or executor or administrator of any estate, if such was committed to acquire any direct or mateiral indirect financial interest.
3) had a joint closely held investment that was material to the covered member.
4) 10% or more of the client's stock.

partners or managers must provide ten or more hours of nonattest services before they are considered to be covered members.


International standards - auditing/assurance

1) International adutiing standard is developed by the international adutiing and assurance standards board of the International Federation of Accountants.


Differences between the IAASB and PCAO:

1) International standards do not require an audit of internal control, while PCAOB standards do so require.
2) International standards do not allow reference to another audit firm invovled in a portion of the audit while PCAOB standards allow the principal auditor to so report.
3) International stnadards for documentation are less detailed than PCAOB standards, leaving more to profesisonal judgment.
4) International standards int he area of going concern include time horizon of atleast, but not limted to 12 months, while PCAOB standards limt the foreseeable future as 12 months.
5) international report may state that the financial statements “present fairly” or that they “give a true and fair view.”


Department of Labor:

1) fostering and promote the welfare of job seekers, wage earners, retirres.
2) conducts financial and performance aduits following Govenrment Auditing Standards relating to its mission including audits of:
1) compliance with applicable laws and regulations
2) Evaluation of economy and efficiency of operations.
3) Evaluation of effectiveness in achieving program results.

Employee benefit plans must be audited in accordnace iwth the Employee Retirement Security Act of 1974. Independence requiremtns are in general similar to those of the AICPA, except that
1) Accountant engaged by the plan sponsor and may serve as actuary.
2) In some circumstances DOL requiremtns differ from AICPA requiremtns, in which case they're genearlly more restrictive.


GAO independence requirements. Some are more restrictive in some areas than those of the AICPA;

exams are:
1) Cpa firm cannot allow personnel working on nonattest engagements to also work on the audit.
2) Government Auditing Standards places restrictions on the nature of nonattest services to be perforemd for he audit client.
1) Nonattest services must be deemed not significant or mateiral to be subject matter of the audit.


Government Accountability Office (GAO)

The GAO mission is to support Congress in meeting its constitutional responsibilities and to help imporvement and accountability of federal government.


The audit report of which organization(s) includes section titles?

International format audit reports include section titles for auditor responsibility, management responsibility and the opinion.


quality control element on accepting or continuing a client relationship has the purposes:

(1) considering the integrity of the client, (2) determining that the firm is competent to perform the engagement, and (3) determining that the firm can comply with legal and ethical requirements.


Which of the following is true about requirements to send a letter of audit inquiry to the client’s lawyer under International Standards on Auditing?

A lawyer’s letter must be obtained if the auditor assesses a related risk of material misstatement.


Bookkeeping service

The SEC requirements make clear that performing bookkeeping services impairs audit independence; this is allowed under AICPA rules (thereby, only for nonpublic clients). has recorded journal entries and made closing entries


Acceptance and continuance of client relationships and specific engagements

Firm will undertake to continue relationships and engagements only
where the firm:

1. Has considered client integrity.
2. Is competent to perform the engagement.
3. Can comply with legal and ethical requirements.


Under International Auditing Standards (ISA), the time horizon for a going concern consideration is

At least twelve months from the date of the audit report. REMEMBER! it is the AUDIT REPORT DATE not the FS date.


Which of the following AICPA standards did the PCAOB not adopt as a part of its interim standards?

Accounting and Review Services Standards. they only apply to nonpublic companies ("non-issuers").


What are the elements of Quality Control?

1) Leadership responsibilities
2) Relevant ethical requirements.
3) Acceptance and continuance of client relationships and specific engagements
4) Human resources
5)Engagement performance
6) Monitoring



The SEC release what type of report?

The Financial Reporting Releases


AICPA and International ISA

Multiple properly disclosed uncertainties in the financial statements may result in a disclaimer of opinion under these standards


Who publishes the Accounting Trends and Techniques?

Accounting Trends and Techniques is published by the AICPA


In regards to commission

commission may be received providing it is not from a client for which the CPA provides any of the following services: (1) audit or review of financial statements, (2) compilation of financial statements expected to be relied upon by a third party or (3) examination of prospective financial information. In addition, a contingent fee cannot be accepted for preparing an initial or amended tax return.


US Standards (both AICPA and PCAOB)

Confirmation is presumptively required unless accounts receivable are immaterial, the use of confirmations would be ineffective or the combined assessed level of inherent and control risk is low.


Under the International Code of Ethics for Professional Accountants an auditor may accept a contingent fee:

If appropriate safeguards are established.


The term generally accepted auditing standards refer to what?

It measures the quality of the auditor's performance.


A CPA must

inform the client of signficant reservations concernign the benefits of the engagment


A CPA generally is required to perform what type of personal financial planning engagement?

1) assisting the client to identify tasks that are essential in order ot act on planning decisions.


A PCAOB engagement that focuses on a selected quality control issue is referred to: