Case Study 5: What Lies Beneath The AICPA Code of Professional Conduct defines independence as consisting of independence of mind and independence in appearance. According to the AICPA Code of Conduct, Section 55 Article IV, An accountant member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities. Moreover, a member who practices their accounting work in a public firm should be independent in fact and appearance when providing auditing and other attestation services (aicpa.org). According to the case study What Lies Beneath, I think that Betty did not show her professional skepticism since she built trust on her client, which she could not have as an auditor. As an auditor, …show more content…
The independence of mind or independence in fact means Betty has to have a state of mind that allow her to form an opinion without bias due to influence that compromises professional judgment. By having an independence of mind allowing an individual to perform his or her audit work with integrity, as well as, maintaining her objectivity and professional skepticism behavior. However, in this case, she did not have an independence of mind since she trusted Toby and she enjoyed working with him since he is also a CPA because it is easy for her to work with him compare to her other clients who do not have the accounting background. As a result, because of long-term relationship and trust that Betty has with Toby, it influenced her decision about the audit opinion. Additionally, to be independent in appearance Betty and her audit team must show unbiased professional judgment when she reviews her clients ' financial statements. Betty had Problems with independence in appearance because in the case study shown me that she has become too close to her client, Toby. Therefore, all auditors have to maintain their professional skepticism as well as maintain independence in their mental attitude and also independence in appearance to provide an unbiased opinion on …show more content…
My appropriate way that I would do during my audit process was that I would ask questions to Toby and his accountants to provide concrete evidence of each item that include in the miscellaneous expense. My team members and I must test the selected items or all the elements from the miscellaneous account by reviewing all the supporting documents such as receipts and invoices. Moreover, the audit team has to conduct the procedure to interview Toby and his staff to clarify all the suspicious about their financial statement reporting amounts. Even Betty and her team had questioned Toby and his employee several times about their miscellaneous expense, they have just realized heavily on Toby’s answers since they trusted him for having a long client relationship, and this was the reason that makes them decided not to investigate further. In my opinion, it is crucial for Betty and her team to investigate further about her client’s miscellaneous expense because it could help them to discover more inappropriate actions that Toby had done to his company’s financial statements. As a result, I think that because Betty did not practice an appropriate professional judgment as well as professional skepticism; she and her audit team have missed red flag in Toby’s fraud
The principles of the AICPA Code of Conduct should guide the work that Jose and Emily do as auditors. The principles that specifically apply to this situation are Responsibilities, The Public Interest, and Due Care. CPAs have the responsibility to “exercise sensitive professional and moral judgments in all activities.” (Mintz, p. 19)
Consult PCAOB Ethics and Independence Rule 3520. What is the auditor independence, and what is its significance to the audit profession? What is the difference between independence in appearance and independence in fact?
Individual Article Review Lily Cobian LAW/421 March 31, 2014 Ramon E. Ortiz-Velez Individual Article Review Introduction My article review is based on Sarbanes-Oxley and audit failure, a critical examination why the Sarbanes-Oxley Act of 2002 was established and why it is not a guarantee to prevent failure of audits. Sarbanes-Oxley Act talks about scandals of Enron which occurred in 2001 and even more appalling the company’s auditor, Arthur Anderson, found guilty of shredding company documents after finding out Enron Company was going to be audited. The exorbitant amounts of money auditors get paid to hide audit discrepancies was also beyond belief. The article went on to explain many companies hire relatives or friends to do their audits, resulting in fraud, money embezzlement, corruption and even the demise of companies. Resulting in the public losing faith in the accounting profession, the Sarbanes-Oxley Act passed in 2002 by congress was designed to restrict what company owners and auditors can and cannot do. From what I gathered in the article, ever since the implementation of the Sarbanes- Oxley Act there has been somewhat of an improvement but questions are still being asked as to why there are still issues that are not being targeted in hopes of preventing more audit failures. The article also talked about four common causes of audit failure: unintentional auditor mistakes, fraud, fatigue and auditor client relationships. The American Institute of Certified Public Accountants (AICPA) Code of Professional Conduct clearly states an independent auditor because it produces a credible audit, however, when there is conflict of interest, the relation of a former employer, or a relative or even the fear of getting fire...
The non-profit professional organization, American Institute of Certified Public Accountants (AICPA), was founded in the United States of America. The organization was founded in 1887, to help ensure that the accounting profession would gain the same respect as the other prestigious occupations had received from the public. The accounting profession, similar to the medical, legal, and engineering professions, is characterized by “…rigorous educational requirements [150 credit hours], high professional standards, a strict code of professional ethics, licensing status [Uniform CPA Examination], and a commitment to serving the public interest” (AICPA, 2016). These five characteristics
Objectivity and independence is most related to the section 5062.2 of CA Accountancy Act because both focus on maintaining objectivity and be free of conflicts of interest in making professional decision. In addition, section 5062.2 shows that a CPA should not accept employment with the Corporation that they audited within last 12 months.
Why It Is Important To Have A Professional Code Of Ethics. Part 1: A code of ethics is essential to a profession, especially a law enforcement agency in my opinion. A code of ethics will provide a starting point for the professionals and for others that they may deal with on a daily basis. It will also ensure fair treatment of members of the profession and the profession it serves. Ethics provides a framework for conducting essential information functions, instituting policies, and developing strategies for service.
With every business activity come opportunities for fraudulent behavior which leads to a greater demand for auditors with unscathed ethics. Nowadays, auditors are faced with a multitude of ethical issues, and it is even more problematic when the auditors fail to adhere to the standards of professional conducts as prescribed by the American Institute of Certified Public Accountants (AICPA). The objective of this paper is to analyze the auditors’ compliance with the code of professional conduct in the way it relates to the effectiveness of their audits.
Integrity in the accounting profession involves adhering to the rules and principles of the profession. This includes remaining free of conflicts of interest and maintaining client relationships in which the accountant can remain objective in discharging his or her responsibilities. This requires independence in fact and in appearance as mandated under section 1.200.001.01, Independence Rule the AICPA Code. In other words, no one should be able to view the accountant as being biased with respect to a client’s financial reporting due to an improper client relationship. Lack of integrity in accounting practices has been, and continues to be, a key element in the downfall of many institutions which has hurt the public trust in the accounting
,dishonesty ,substance abuse and absenteeism. Would all play a part in the ethical violation of
The purpose of internal auditing and the professionals who provide internal auditing services according to the definition created by the Institute of Internal Auditors is to provide “an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.” Several guidelines and processes have been created to aid an internal auditor in providing the objective, value adding services they’re supposed to. The International Professional Practice Framework is the compass that provides internal auditors
The Federal Government, State and Local Governments (SLG), and Not-for-profit organizations (NFP) all have unique objectives and assets under their control. As a result it may not be feasible to develop a single set of accounting standards that accurately represents all of their financial activity in a manner that is useful to concerned parties. To resolve these discrepancies three separate standard setting bodies have been tasked with developing Generally Accepted Accounting Principles (GAAP) for these different organizations: The Federal Accounting Standards Advisory Board (FASAB) for federal accounting, the Governmental Accounting Standards Board (GASB) for SLG, and the Financial Accounting Standards Board (FASB) for NFPs. The different standards created by these organizations all achieve their goals with varying strengths and weaknesses.
Ethics play a vital role in day-to-day living from work to home. The ability to recognize ethical dilemmas and apply ethical theories to resolve ethical dilemmas is essential part of an individual 's psychological, physical, emotional, and spiritual well-being. The purpose of this paper is to explore the strengths and weakness of the American Psychological Association (APA) code of ethics, apply and evaluate the eight-step ethical decision-making model, discuss the role of deontology in ethical reasoning, resolution, and multicultural issues in the case study.
A company's code of ethics is very important to establishing the expectations and quality of its brand. The code of ethics are concrete expectations for employee behavior, accountability and communicates the ethical policy of a company to its partners and clients. A good business practice is to have sound ethics. Having good ethical practice is knowing the difference between right and wrong and choosing what the right thing is. Though good ethical behavior is something that should be done automatically, a company needs to have a set of rules in place that holds everyone accountable. Over the last twenty years, the country has been bombarded with company scandals and unethical behavior; though morally wrong, the punishment does not fit the crime. The punishments have been overkill. A murderer, rapist, or child molester commits violent crimes and potentially is out of jail in 10 - 20 years. The CEO’s that commit white collar crime receive 25 years to life; this paper will discuss how this punishment for committing nonviolent crimes, such as breaching a company’s code of ethics, are disproportionate to violent crimes that plague the country today.
Exercise of “reasonable skill, care and caution” varies according to situations (Lopes, J. in Kingston Cotton Mill Co 1896). Nevertheless, to achieve such in performing an audit, its an auditors responsibility to comply with the requirements cited in ISA (NZ) 200, as follows (1) Ethical requirements
Accounting standards are a set of principle that govern current accounting practice and are used as a reference to determine the appropriate treatment of complex transactions. Having financial statements in the same format allow them to be compared and in this essay we shall discuss how the accounting standards came about, and why it continues to exist until this very day, as the format of such practice has changed dramatically over the years as they are now used as a reference when problems occur.