Are Interpretations enforceable?
YES
Are Rulings enforceable?
NO
What are the SEC & PCOAB ethical requirements?
- Integrity & Objectivity
- Professional Skepticism
- Confidentiality
PCAOB rule: How long is the cooling off period before a member of the audit engagement team can be employed in a financial reporting oversight role at the audit client?
1 year
PCAOB rule: How often does the lead audit partner and the concurring review partner need to rotate off the audit engagement?
Every 5 years
SEC ethical principles:
- Integrity
- Objectivity
- Professional Competence
- Confidentiality
- Professional Behavior
PCAOB ethical standards:
- Integrity
- Objectivity
- Due Professional Care
- Independence
- Confidentiality
Government Accountability Office Government Auditing Standards Ethical Requirements
- Serve the public interest
- Integrity,
- Objectivity
- Proper use of Gov Information, Resources and Positions
- Professional Behavior
What needs to be maintained in public practice and in private practice?
Objectivity and Integrity
What only needs to be maintained in public practice?
Independence
What type of Bias to professional skepticism is this: information that confirms their existing beliefs
Confirmation bias
What type of Bias to professional skepticism is this: auditors may give disproportionate weight to the first information they receive
Anchoring bias
What type of Bias to professional skepticism is this: auditors may overestimate their own abilities, leading to less rigorous investigations/not seeking additional evidence
Overconfidence bias
What type of Bias to professional skepticism is this: auditors judge the probability of events based on how easily they come to mind
Availability bias
What type of Bias to professional skepticism is this: auditors become too trusting or accepting of the client’s practices leading to lack of skepticism
Familiarity bias
What type of threat to independence/ objectivity/professional skepticism is this: personal interests conflict with the duty to act objectively
Self-review threat
What type of threat to independence/ objectivity/professional skepticism is this: close relationships with a client can lead to sympathy with their interests, reducing skepticism
Familiarity threat
What type of threat to independence/ objectivity/professional skepticism is this: auditors might face pressure from clients to agree with their accounting practices/conclusions, threatening the auditor’s ability to remain objective.
Intimidation threat
What type of threat to independence/ objectivity/professional skepticism is this: when auditors promote a client’s interests or position, their ability to remain neutral and skeptical is compromised.
Advocacy threat
What type of threat to independence/ objectivity/professional skepticism is this: bonuses or other incentives tied to client retention or satisfaction can impair an auditor’s impartiality
Incentive systems
What type of threat to independence/ objectivity/professional skepticism is this: auditors might rely on rules of thumb or heuristics to make quick judgments, which can lead to systematic errors or biases.
Judgment-making shortcuts (heuristics)
Occurs when an auditor becomes too sympathetic to the interests of others because of a close relationship. A close personal friendship can lead to the auditor being less objective and more lenient in their judgment, thus impairing independence.
Familiarity threat
Refers to an inclination or prejudice for or against one person or group, especially in a way considered to be unfair.
Bias
Occurs when auditors have a financial or other interest that could inappropriately influence their judgment or behavior.
Self-interest threat
