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Definition
| A set of moral principles or values |
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Definition
| A situation a person faces in which a decision must be made about the appropriate behavior. |
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| The reason why it is not practical for most customers to evaluate the quality of the performance of professional services. Also one of the reasons for the need for a code of professional conduct. |
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Definition
| International Ethics Standards Board for Accountants. |
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| Code of Professional Conduct- Principles |
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Definition
| Ideal Standards of ethical conduct stated in philosophical terms (not enforceable) |
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| Code of Professional Conduct- Rules of Conduct |
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Definition
| Minimum standards of ethical conduct stated as specific rules (they are enforceable) |
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| Code of Professional Conduct- Interpretations of the rules of conduct |
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Definition
| Interpretations of the rules of conduct by the AICPA Division of Professional Ethics. (They are not Enforceable, but a practitioner must justify departure) |
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| Code of Professional Conduct- Ethical Rulings |
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Definition
| Published explanations and answers to questions about the rules of conduct submitted to the AICPA by practitioners and others interested in ethical requirements. |
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Term
| 9 Non-audit Services provided to Public Companies that are prohibited by the SEC and PCAOB |
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Definition
1) Bookkeeping
2)Financial Information Systems Design and Implementation
3)Appraisal or Valuation Services
4)Actuarial Services
5)Internal Audit Outsourcing
6) Management or Human Resource function
7) Broker or dealer or Investment adviser or investment banker services.
8) Legal and Expert services unrelated to the audit
9) Any other service that the PCAOB determines by regulation is impermissible. |
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Definition
| SOX requires that all audit committees are made up of members who are independent, and companies must disclose whether or not the audit committee includes at least one member who is a financial expert. |
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Definition
| Sox and SEC rules require the lead and concurring audit partner to rotate off the audit engagement after five years. |
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Term
| Shopping for Accounting Principles |
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Definition
| When a company switches Auditors or consults with other accountants in order to get more leeway. The new CPA firm must hold its stance. |
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Term
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Definition
| Independence- A member in public practice shall be independent in the performance of professional services as required by standards promulgated by bodies designated by council. |
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Term
| Investments in Audit Clients By Covered Members |
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Definition
Direct Investment is prohibited.
Indirect Investment(such as ownership of stock by a close but not immediate family member) is prohibited if the amount is material. |
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| Normal Lending Procedures |
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Definition
| It is permissible for a CPA firm to take on a bank as an audit client even if there are members of the CPA firm who have mortgages with the bank. No new loans may be granted however. Automobile loans, credit card balances of less than 10,000 and loans who which have collateralized cash deposits at same institution, are exceptions. |
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| Directorship and Independence |
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Definition
| A CPA may not be on the board of directors of an audit client company. Interpretations do allow CPA's to be honorary directors or trustees for not-for-profit organizations however. As long as the position is purely Honorary. The CPA cannot Vote or participate in management function. |
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Term
| Bookkeeping and AICPA independence |
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Definition
This is permissible however the three conditions must be met:
1) The Client must accept full responsibility for the financial statements.
2) The CPA must not assume the role of employee or of management conducting the operations of an enterprise.
3)The CPA must conduct an audit of the books he/she prepared in accordance with GAAS |
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Term
| Consulting Services and Independence |
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Definition
| Consulting activities are permissible as long as the member does not perform management functions or make management decisions. A CPA firm may assist in the installation of a clients information system as long as the client makes necessary management decisions about the system. |
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| Unpaid Fees and Independence |
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Definition
| Independence is considered impaired if billed or unbilled fees remain unpaid for professional services provided more than 1 year before the date of the report. |
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Term
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Definition
| Integrity and Objectivity- In the performance of any professional service, a member shall maintain objectivity and integrity, shall be free of conflicts of interest, and shall not knowingly misrepresent facts or subordinate his or her judgment to others. |
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Term
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Definition
General Standards:
1) Professional Competence- Undertake only those professional services that the member or the member's firm can reasonably expect to be completed with professional competence.
2)Due Professional Care- Exercise due professional care in the performance of professional service
3)Planning and Supervision- Adequately plan and supervise the performance of professional services.
4) Sufficient Relevant Data- Obtain sufficient relevant data to afford a reasonable basis for conclusions or recommendations in relation to any professional services performed. |
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Term
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Definition
| 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. |
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Term
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Definition
Accounting Principles- If financial statements depart from GAAP the auditor must not give an unqualified opinion or state that departures are not material if they truly are. The member may comply with this rule if such explanation is necessary:
" The Client did not follow the GAAP principle, however I agree with the client." |
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Term
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Definition
Confidential Client Information- A member in public practice shall not disclose any confidential client information without the specific consent of the client.
Exceptions include:
1) Obligations related to technical standards
2) Subpoena or summons and compliance with laws and regulations
3)Peer Review
4)Response to ethics division. |
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Term
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Definition
Contingent Fees- A member in public Practice shall not
1)Perform an audit, review, compilation or examination of financial statements for a contingent fee.
2) Prepare tax returns for a contingent fee. |
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Term
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Definition
Acts Discreditable- A member shall not commit an act discreditable to the profession. These include
1) Retention of client records
2) Discrimination and harassment in the workplace
3) Must Meet standards for Government Audits
4) Negligence in the preparation of Financial Statements or records
5)Failure to follow requirements of governemental bodies, commissions, or other regulatory agencies
6) Solicitation or Disclosure of CPA examination questions or answers.
7) Failure to file tax return or pay tax liability |
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Term
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Definition
| Advertising and Other forms of solicitation- No false, misleading, or deceptive advertising. No use of coercion overreaching, or harassment. |
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Term
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Definition
Commissions and Referral Fees-
CPA's may not receive commissions for fees when the CPA also conducts the audit/review/compilation for that client.
If this rule does not prohibit the CPA from receiving commissions, and the commission is based on a refferal,the CPA must disclose to the party receiving the referral that they are being paid a commission. The CPA must also disclose the acceptance and payment of the contingent referral fee. |
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Term
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Definition
Form of Organization an Name-
1) form or organization must be permitted by state law or regulation
2) Name must not be misleading, however names of past owners is acceptable
3) In order to be designated "Members of AICPA, all members must be CPA's.
4) There may be ownership of CPA firms by non-CPA's so long as the majority ownership lies with CPA's, The Non-CPA's must not represent themselves as CPA's, Non-CPA's cannot conduct audits, Non-CPA owners must abide by the AICPA code of professional Conduct. |
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Term
| Six Step approach to resolving ethical dilemmas |
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Definition
1) Obtain Relevent Facts
2) Identify the ethical issues from the facts
3)Determine who is affected from the out come and how
4)Identify the alternatives available to the person who must resolve the dilemma.
5) Identify the likely consequence of each alternative
6) Decide the appropriate action |
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