Chapter 3 - Ethics

Question 1

What framework is used for ethical dilemma not specifically covered by the AICPA Code of Conduct?

Answer 1

Conceptual Framework

Question 2

Name at least three threats to independence?

Answer 2

Adverse Interest, Advocacy, Family or friend, Management Participation, Self-Interest., undue Influence (e.g. Threat of Suit).

Question 3

What are some of the main standards covered by the PCAOB?

Answer 3

Auditing, Attestation, Ethics & Independence, Quality Controls, Interpretations.

Question 4

What is the confidential relationship rule?

Answer 4

Do not disclose illegal acts to outside parties unless auditors have a legal obligation to due so.

Question 5

What situation would an auditor be required to file an 8K related to a client’s illegal act?

Answer 5

A material fraud and management fail’s to act.

Question 6

Does the independence standard require only actual independence to meet the tenant of the standard.

Answer 6

No, you must meet both independence of both fact and appearance to meet the standard.

Question 7

Who is considered a covered member?

Answer 7

1- Staff working on the attest engagement.
2- An individual who may influence the attest engagement.
3 - A partner in the office in which the partner in charge of the attest engagement primarily practices.
4- Partners or managers that provide a specified amount of nonattest services to client.

Question 8

Name at least three consulting services that violate your independence with a client?

Answer 8

Bookkeeping.
Financial systems design and Implementation.
Appraisal or valuation services.
Actuarial services.
Internal audit outsourcing.
Management functions or human resource services.
Investment services.
Legal services and expert services.
Certain tax services.

Question 9

Are audit work papers required to be shared with the client?

Answer 9

No, they are the auditor’s property and need not be provided to client, unless required by law.

Question 10

Are contingent or referall fees allowed to be received from an audit client?

Answer 10

No, those arrangements are only allowed for non-attest clients.