Professional Documents
Culture Documents
2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
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Learning Objective 1 Distinguish ethical from unethical behavior in personal and professional contexts.
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Respect Responsibility
Caring Citizenship
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2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
Most people who commit such acts feel no remorse when they are apprehended because their ethical standards differ from those of society as a whole.
2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
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2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
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Learning Objective 2
Resolve ethical dilemmas using an ethical framework.
2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
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Ethical Dilemmas
An ethical dilemma is a situation a person faces in which a decision must be made about appropriate behavior.
2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
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2. Identify the ethical issues from the facts. 3. Determine who is affected.
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5. Identify the likely consequence of each alternative. 6. Decide the appropriate action.
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Ethical Dilemma
A staff person has been informed that he will work hours without recording them as hours worked. Firm policy prohibits this practice.
Another staff person has stated that this is common practice in the firm.
2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
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Ethical Dilemma
Is it ethical for the staff person to work hours and not record them as hours worked in this situation? Who is affected?
How are they affected? What alternatives does the staff person have?
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Learning Objective 3 Explain the importance of ethical conduct for the accounting profession.
2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
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Peer review
Quality control
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Learning Objective 4 Describe the purpose and content of the AICPA Code of Professional Conduct.
2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
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2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
Interpretation of the rules of Interpretation conduct by the AICPA Division of Professional Ethics of the rules of conduct They are not enforceable, but a practitioner must justify departure.
2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
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Ethical Principles
1. Responsibilities
Professionals should exercise sensitive and moral judgments in all their activities. 2. Public Interest Members should accept the obligation to act in a way that will serve and honor the public.
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Ethical Principles
3. Integrity
Members should perform all responsibilities with integrity to maintain public confidence. 4. Objectivity and Independence Members should be objective, independent, and free of conflicts of interest.
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Ethical Principles
5. Due Care
Members should observe the professions standards and strive to improve competence. 6. Scope and Nature of Services A member in public practice should observe the Code of Professional Conduct.
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Standards of Conduct
Ideal conduct
Principles
Minimum Level
Substandard conduct
Rules of conduct
2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
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2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
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Independence
Independence means taking an unbiased viewpoint in performing audit tests. Independence in fact
Independence in appearance
2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
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Independence
Audit committee
Shopping for accounting principles Approval of auditors by stockholders Engagement and payment of audit fees by management
2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
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ISB pronouncements and interpretations remain enforceable unless they conflict with the independence rulings issued by the SEC.
2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
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Learning Objective 6 Apply the AICPA Code rules and interpretations on independence and explain their importance.
2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
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Independence
Rule 101 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.
2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
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Financial Interests
Interpretations of Rule 101 prohibit covered members from owning any direct investments in audit clients. Direct financial interest
Indirect financial interest
Material or immaterial
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2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
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Learning Objective 7 Understand the requirements of other rules under the AICPA Code.
2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
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Rules of Conduct
101 Independence
102 Integrity and objectivity 201 General standards 202 Compliance with standards 203 Accounting principles
Rules of Conduct
302 Contingent fees
501 Acts discreditable 502 Advertising and other forms of solicitation 503 Commissions and referral fees 505 Form of organization and name
2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
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Learning Objective 8 Describe the enforcement mechanisms for the rules of conduct.
2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
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Enforcement
Action by AICPA Professional Ethics Division
End of Chapter 4
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