Professional Responsibilities Flashcards Preview

CPA Exam > Professional Responsibilities > Flashcards

Flashcards in Professional Responsibilities Deck (27):
1

Covers all professional engagements and is the minimum standard of conduct

Member should additionally follow specific standards for a specific engagement

Professional Responsibilities - Audit

2

Integrity
Objectivity
No Conflicts of Interest
No known misrepresentations of facts
No outsourcing of judgment

Professional Responsibilities - Audit

3

Safeguards > Threats - Independence

Threats > Safeguards - No Independence

Professional Responsibilities - Audit

4

Self-Review (Auditing own work)

Advocate of the Client

Adverse Interest (Lawsuit against Client)

Too familiar with Client - could impair the appearance of Independence to public

Undue influence on Client - On Board of Directors- exception being an Honorary board position

Professional Responsibilities - Audit

5

Offset the threats

Safeguards are created by Legislation (SOX)- Client (Audit Committee)- Accounting Firm (Policies)

Professional Responsibilities - Audit

6

On the engagement team- have Significant influence on Audit- such as:

Reviewing Partner
Managing Partner in CPA Firm
Firm Personnel who does more than 10 hours of non-attest work (Income Taxes)
Partner sharing office with another Partner who oversees an engagement
Financial Interest in Client by Covered Member (Auditor on Engagement)

Professional Responsibilities - Audit

7

No direct financial interest

No Material indirect financial interest

Firm personnel who are not Covered Members cannot own more than 5% of stock

Covered Member's immediate family cannot own more than 5% of stock or be employed in Key positions. If Covered member is aware of this- it will impair independence.

Cannot make management decisions.

All requirements apply during the period of the professional engagement- and as long as they are a client.

Professional Responsibilities - Audit

8

If Supervisor's position is still GAAP/GAAS- defer to Supervisor

If Supervisor's position is not GAAP/GAAS- report to higher levels of management

If management ignores you- consider leaving the firm

Professional Responsibilities - Audit

9

Audit

Review

Attestation Engagement

Professional Responsibilities - Audit

10

Agreement must be in writing.
Independence not required - Must state if you are not independent

Applicable engagements: Consulting- Compilation

Professional Responsibilities - Audit

11

Consulting engagements are covered by Statements on Standards for Consulting Services (SSCS)

Requirements: Competence- Due Care- Planning- Supervision- Obtain Sufficient Data- Must Serve Client Interest- Must have written or oral agreement- must communicate with client.

Professional Responsibilities - Audit

12

Advisory Services

Transaction Services

Management Consulting

Implementation Services

Professional Responsibilities - Audit

13

Not allowed if Member also performs services where independence is required

Commissions or referral fees for Covered Members are not allowed

Example - Audit firm gets a commission for recommending to Client that they implement a new A/P System...NOT Allowed

If a firm performing non-attest work doesn't also perform Covered Member services (aka - Independence not
required)- then Firm can get a commission on referring products/services- but they must disclose to the Client

Tax Preparation - Payment according to refund amount is disallowed

Professional Responsibilities - Audit

14

When fees are structured relative to judicial proceedings.

Example: IRS audit- or filing an amended tax return subject to tax case with a different taxpayer.

Professional Responsibilities - Audit

15

Client must carry them out - covered member cannot perform management functions.

Client must assign someone of competence to oversee the non-attest engagement and CPA must be satisfied that this has occurred.

Professional Responsibilities - Audit

16

Must have definite objectives

Must have specific procedures planned

Must have a basis for recommendations

Must have recommendations communicated

Must have action steps to implement

Professional Responsibilities - Audit

17

Departure from GAAP is appropriate if GAAP would cause Financial Statements to be misleading- then it must be explained/disclosed.

Professional Responsibilities - Audit

18

Member may disclose confidential info when client isn't following GAAP

OR

If they receive a subpoena - CPAs are not Attorneys- so there is no CPA-Client privilege

Professional Responsibilities - Audit

19

This is an act discreditable.

You MUST return all documents the client gives you even if they don't pay their bill.

If you create a document- however- like a work paper- you are not required to give the client a copy of papers you created if they haven't paid their bill

They are the firm's work papers- but are still confidential!

Professional Responsibilities - Audit

20

CPA firm names must not be misleading.

If partner dies- remaining partner has two years to change name if partnership dissolved. If partner dies and more than one partner still remains (i.e. 1 dies and you still have 2 or more partners...you don't need to change the name)

All Partners/Shareholders must be members of the AICPA in order to hold themselves out as members of the AICPA. Non-CPAs can be owners- but 2/3 of Ownership must be CPAs. Non-CPA owner must not be involved with the accounting- and is still bound by AICPA code of conduct- must maintain CPE requirements and have Bachelor's degree.

Professional Responsibilities - Audit

21

It is an Act Discreditable.

Professional Responsibilities - Audit

22

Licenses are granted at the State level
If State revokes certificate- AICPA Ban
Felony Conviction- AICPA Ban
Prepares Fraudulent Tax Return- AICPA Ban
Intentionally failing to file return- AICPA Ban
SEC can get involved with discipline

Professional Responsibilities - Audit

23

Monitors CPA Firms who audit SEC clients - All SEC Audit firms must register

Issues standards for firms to follow - usually stricter than AICPA standards

Professional Responsibilities - Audit

24

If Client pays a contingent fee (i.e. based on outcome)

With Marketing or Planning engagements

Aggressive Tax Strategies

Firm does tax work for Client employee involved with audit oversight or their
family

Professional Responsibilities - Audit

25

Client Audit Committee must approve non-audit work performed by Firm

Firm must disclose any potential independence issues to Audit Committee

Professional Responsibilities - Audit

26

GAO - Government Accountability Office

Professional Responsibilities - Audit

27

Auditors must follow both GAAS and GAS aka the Yellow Book materiality threshold is usually lower
More detail is required on working papers
More stringent CPE rules and requirements - 24 hours of continuing education must be related to governmental auditing every 2 years
Compliance with Regulations is a requirement of the Audit Report

Professional Responsibilities - Audit