Modern Auditing:

Assurance Services and the Integrity

of Financial Reporting, 8th Edition

William C. Boynton
California Polytechnic State
University at San Luis Obispo
Raymond N. Johnson
Portland State University

Chapter 3 – Professional Ethics

Chapter 3 Overview
 Ethics and Morality
• General Ethics
– Ethical Dilemma
– Ethical Absolutists
– Ethical Relativists

• Professional Ethics
– Commitment by profession
– Ethical Principles and Rules of Conduct
 AICPA Professional Ethics
Division
• Standard Setting

• Ethics Enforcement

• Technical Inquiry Services

 Composition of The Code
• Two Sections
– Principles
– Rules of Conduct

• Pronouncements
– Interpretations of the Rules of Conduct
– Ethical Rulings
 Ethical Principles
• Responsibilities

• The Public Interest

• Integrity

• Objectivity and Independence

• Due Care

• Scope and Nature of Services

Rule 101 - Independence
 Engagement-Based Approach
• Covered Members

• Prohibited Activities

• Immediate Family Members

• Close Relatives

• Other Professionals and Their Immediate

Family Members
 Employment with an Attest
Client
• Employee becomes employed by
client
– Public Companies
– Private Companies

• Employee seeks employment with

client
 Other Independence Issues
• Nonattest Services

• Private Companies

• Litigation

• Unpaid Fees
AICPA Rules of Conduct
AICPA Rules of Conduct (cont.)
 State Boards and PCAOB
• State Accountancy Statutes and
Laws

• Audit Firms of Public Companies

 Enforcement of the Rules
• Joint Ethics Enforcement
Procedures (JEEP)

• Joint Trial Board Procedures

– Admonishment
– Suspension
– Expulsion

• Automatic Disciplinary Provisions