M7 The AICPA Code of Professional Conduct Flashcards
(15 cards)
What code governs all other services provided by a CPA
The AICPA code
What are the three sections of the code of professional conduct
1.xxx members in public practice
Covered members
Immediate family members
Close relatives
2.xxx members in private practice
3.xxx other members (voluntary retirement, between jobs)
Public accountant’s independence requires both
- Independence in fact and
- Independence in appearance (would a reasonable business person assess that you are objective.
Who must be independent and how is independence impaired regarding financial interests?
-Public CPA firms
-All relatives and family members of the CPA
-Independence is impaired by a member, a member’s spouse or dependents or a close family member who holds a key position in an audit client.
When is independence not impaired regarding financial interests?
A car loan is fully collateralized
A cash advance or balance not exceeding $10,000
A FDIC insured bank account
A Passbook loan
A mutual fund owned by the CPA owns shares of the client.
When is independence by employment relationships impaired
-CPA was previously employed by an attest client
-Leaves the audit firm for a position with a client within cool off period of 1 year
-Participates on the engagement team
-Has an immediate family member or relative employed in a key position with the client.
-Leave the firm and is employed by the client in a key position
-Is seeking or discussing employment with the client
When is independence impaired regarding business relationships?
Independence is impaired if:
If acting as management
General counsel
Trustee of a pension plan
*not impaired if business is a not for profit, religious group or civic group.
Can a member continue to do service if a client has not paid for there prior audit?
A member can continue to do the service if the client guarantees in writing to pay the dues for prior services before release of the new report.
What are the core tenants of the general standards rule
-Professional compliance
-Planning and supervision
-Sufficient relevant data
Due professional care
What are some of the acts discreditable?
-Failure to return records to a client
-Determination of discrimination or harassment
-Failure to follow GAAP standards unless disclosed
-Negligence in preparing financial statements or records
-Solicitation or disclosure of CPAA exam questions / answers
-Engaging in false, misleading, or deceptive acts related to professional qualifications or competencies
-Failure to timely file a personal or firm tax return or timely remit payroll/taxes
-Promotion or marketing of the member’s abilities to provide professional services in a manner that is
False misleading or deceptive
-A member who was terminated shall not take or retain:
-originals or copies from the firm’s client files or proprietary information without the firm’s permission.
-Disclosure of confidential information without the client’s permission
When are contingent fees allowable
Only permitted when:
-Fees are fixed by a court or a judicial proceeding
-When fees are mandated by law and legislation
When can a member disclose confidential client information without approval?
-To comply with validly issued subpoena or summons
-As part of a quality review of the member’s professional practices authorized by the AICPA
-In response to any inquiry made by the ethics division or trial board of the AICPA or under authority of state statues
-For legal defense against a lawsuit filed by a client.
What are the seven threats
- Adverse interest threat:
Not acting with objectivity because the member’s interests are opposed to the client’s interests- Advocacy threat
Promoting the client’s interests or position to the point that the member’s objectivity or independence is compromised - Familiarity threat
Becoming too sympathetic or accepting because of relationships - Management participation threat
Taking on the role of client management or otherwise assume management responsibilities - Self-interest threat
Benefiting financially or otherwise, from an interest in or relationship with, a client or persons associated with the client. - Self-review threat
Not appropriately evaluating the results of a previous judgement made or service performed or supervised by the member or individual in the member’s firm (auditor acts as both external and internal auditor) - Undue influence threat
Subordinating the judgement to an individual associated with a client or any relevant 3rd party due to that individuals
Reputation or expertise
Aggressive or dominant personality
Attempts to coerce or exercise excessive influence over the member
- Advocacy threat
The principle of due care in the AICPA Code of Professional Conduct relates to which of the following professional requirements?
Providing services with competence and diligence
Ignoring materiality is an issue with
objectivity and integrity
