General decision making framework Step 1: Auditor structures the problem, considering the relevant parties to involve in the

decision process, identify various feasible alternatives, considering how to evaluate alternatives and idenfitying uncertainties or risks. Step 2: assess the consequences of the potential alternatives. Step 3: auditor assess the risks (audit client & quality and sufficiency of data gathered) and uncertainties in the situation. Step 4: evaluates the various information/audit evidence-gathering alternatives against the appropriate decision. Step 5: sensitivity analysis of step 2-4 Step 6: auditor gathers information and audit evidence in an iterative process that affects considerations about the consequences of potential alternatives and the uncertainties associated with those judgements. Step 7: determination of whether the problem has been sufficiently analyzed and whether the risk of making an incorrect decision has been minimized to an acceptable level. Ethical decision making process Ethical problem occurs when an individual is morally or ethically required to take an action that may conflict with his or her immediate interest. Ethical dilemma occurs when there are conflicting moral duties or obligations. Ethical theories 1. Utilitarian theory   What is ethical is the action that achieves the greatest good for the greatest number of people. Decision steps o Identification of the potential problem and courses of action. o Identification of the potential direct or indirect impact of actions on stakeholders o Assessment of the desirability of action o Overall assessment of the greatest good for the greatest number

2. right theory  Focuses on evaluating actions based on the fundamental rights of the parties involved.

Level of rights o 1st life, autonomy and human dignity o 2nd rights granted by the government such as civil rights, legal rights o 3rd social rights such as right to higher education, to good health care o 4th nonessesntial interests- play golf, be rich Decision steps o Identify ethical issues o Determine who are the affected parties and identify their rights o Determine the most important rights o Develop alternative courses of action o Determine the likely consequences of each proposed course of action o Assess the possible consequences, including an estimation of the greatest good for the greatest number o Decide the appropriate course of action.

Professional conduct Rules of conduct are specific guidelines that reflect the board principles of the profession. Strict compliance with independence is important on covered member ( attest engagement team, in a position to influence the attest engagement, partner in the office which the lead attest engagement partner primarily practices. Financial interest Direct financial interest is a financial interest owned directly by or under the control of an individual or entity or beneficially owned through an investment vehicle. Indirect interest occurs when the beneficiary neither controls the intermediary nor has the authority to supervise. (5% or less) Confidentiality Privilege communication: mean that confidential information obtained about a client cannot be subpoenaed by a court of law to be used against that client. Contingent fees Fee established for the performance of any service in which a fee will not be collected unless a specified finding or result is attained or which amount depends on the finding or results. Managing threats to independence 1. Establishing and monitoring corporate codes of conduct 2. Developing appropriate compensation schemes

3. 4. 5. 6.

Implementing high-level reviews of decisions to accept of reject clients Separating consulting activities from audit activities Performing within-firm reviews of audit work and audit documentation Performing reviews and inspections within the profession.

Skepticism- an attitude that includes a questioning mind and a critical assessment of audit evidence

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