Kế toán, kiểm toán - Module B: Professional ethics

Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinModule B Professional Ethics“Auditors must approach their jobs with independence and skepticism. How do we instill those necessary traits in auditors? This may be the most important auditing question of our time.”James Doty, PCOAB Chairman, remarks made at SEC Reporting Conference, June 2, 2011“To educate a person in mind and not in morals is to educate a menace to society.”Theodore “Teddy” Roosevelt, 26th President of the United States“Always do right—this will gratify some and astonish the rest.”Mark Twain, famous American novelist“There is nothing so powerful as truth.”Daniel Webster, Secretary of State for three different U.S. presidents in the period after the American Revolution Mod B-2Learning ObjectivesUnderstand general ethics and a series of steps for making ethical decisions.Reason through an ethical decision problem using the imperative, utilitarian, and generalization principles of moral philosophy.Identify the different entities that make ethics rules for CPAs and public accounting firms.With reference to American Institute of Certified Public Accounting (AICPA), Government Accountability Office (GAO), Public Company Accounting Oversight Board (PCAOB), and Securities and Exchange Commission (SEC) rules, analyze factual situations and decide whether an accountant’s conduct does or does not impair independence.With reference to AICPA rules on topics other than independence, analyze factual situations and decide whether an accountant’s conduct does or does not conform to the AICPA Rules of Conduct.Explain the types of penalties that can be imposed on accountants.Mod B-3What is an Ethical Problem?A problem situation exists when an individual must make a choice among alternative actions and the right choice is not absolutely clear. An ethical problem situation may be described as one in which the choice of alternative actions affects the well-being of other persons. Mod B-4An Ethical Decision ProcessDefine all facts and circumstances Identify stakeholdersIdentify stakeholders’ rights and obligations in general and to each otherIdentify alternatives and consequencesChoose superior alternative with respect to consequences and/or rulesMod B-5The Imperative PrincipleDirects a decision maker to act according to the requirements of an ethical ruleStrict versions of imperative ethics maintain that a decision should be made without trying to predict whether an action will create the greatest balance of good over evilEthics in the imperative sense is a function of moral rules and principles and does not involve a situation-specific calculation of the consequencesMod B-6The Principle of UtilitarianismEmphasizes examining the consequences of an action rather than following rulesThe criterion of producing the greater good is made an explicit part of the decision processIn act-utilitarianism, the center of attention is the individual act as it is affected by the specific circumstances of a situationRule-utilitarianism emphasizes the centrality of rules for ethical behavior while still maintaining the criterion of the greatest universal goodMod B-7The Generalization ArgumentA judicious combination of the imperative and utilitarian principlesConsiders the consequences of a decision made by similar persons acting under similar circumstances“What would happen if everyone acted in that certain way?”If the answer to the question is that the consequences would be undesirable, the conclusion is that the way of acting is unethical and should not be done. Mod B-8AICPA Code of Professional Conduct Ideal standards of ethical conductMinimum standards of ethical conduct stated as specific rulesInterpretations of the rules by the AICPA division of professional ethicsPublished explanations and answers to questions about rules of Conduct Principles Rules of Conduct Interpretations Ethical RulingsMod B-9AICPA Code of Professional Conduct:PrinciplesBasic tenets of ethical conductResponsibilities - exercise sensitive professional and moral judgmentPublic Interest - honor the public trustIntegrity - perform responsibilities with the highest sense of integrityObjectivity - impartial, unbiased, and independent, free of conflicts of interest and independent in fact and appearanceDue care - diligence, competence, thorough, promptScope and nature of services - observe the principles when considering the scope and nature of services provided Mod B-10An Emphasis on IndependenceRule 101: IndependenceA member in public practice shall be independent in the performance of professional services as required by standards promulgated by bodies designated by Council.Mod B-11Threats to an Auditor’s IndependenceFamiliarity threat. CPAs having a close or longstanding relationship with a client.Adverse interest threat. CPAs acting in opposition to clients (e.g., through litigation).Undue influence threat. Attempts to coerce or otherwise influence the CPA member (e.g., significant gifts or threats to replace the auditor over an accounting principles disagreement).Self-review threat. CPAs reviewing their own work.Financial self-interest threat. CPAs having a financial relationship with a client.Management participation threat. CPAs taking on the role of client management or otherwise performing management functions.Advocacy threat. CPAs promoting a client’s interests or position.Mod B-12Who is a Covered Member?Covered members include All individuals participating in an engagement.An individual in a position to influence the engagement.A partner or manager who provides nonattest services to an attest client.A partner in the office where engagement partner practices.The firm’s benefit plan.An entity that can be controlled by any person considered a member.Mod B-13AICPA Code of Professional ConductRule 101: IndependenceApplies to attestation engagements (audits and reviews)Financial relationshipsNo direct financial interestNo material indirect financial interestsNo material joint ventures with client, officers, directors, or shareholdersLoans - normal lending practices, collateral requiredManagerial relationshipsCannot act as a promoter, underwriter, or equivalent to an employee (i.e., no decision making)Mod B-14AICPA Code of Professional ConductRule 101: IndependenceFor the purpose of independence Immediate family members have the same restrictions as the memberSpouse, spousal equivalent, or dependent cannot have A direct financial interestA material indirect financial interestHold a position of influence with an audit client Close relativeAll immediate family members and parents, siblings, or nondependent child cannotOwnership or control of an audit clientEmployment with a client in an audit sensitive position Mod B-15AICPA Code of Professional ConductRule 101: IndependenceWrite-up services are allowed if:Client understands and accepts the statements as their ownAuditor does not assume a role of employee or managementNo other relationship that impairs integrity and objectivityException: Cannot do write-up services for public company clientsMod B-16AICPA Code of Professional ConductRule 101: IndependenceLoans from financial institutions are permitted if:Obtained prior to 2/5/01 under old rules.Obtained prior to the lender becoming a client.The loan was sold to an attest client.The loan was obtained before the CPA became a member.Loans on life insurance.Fully collateralized by cash deposits, loans, leases, etc.Credit cards and cash advances less than $10,000.Mod B-17AICPA Code of Professional ConductRule 101: IndependenceThreatened litigation impairs independence ifmanagement and the auditors are suing each other.But, Lawsuits from 3rd parties do not effect independence.ManagementAuditorMod B-18AICPA Code of Professional ConductRule 101: IndependenceFinancial interest in a nonclient may impair independence when the nonclient has a financial interest in the client.AuditorNonclientClientOwnsOwnsAuditMod B-19SEC & PCAOB Independence RulesAn auditor’s independence depends on auditors both having the proper mental state and passing the appearance test. Thus they must have:Independence in fact A mental state of objectivity and lack of biasIndependence in appearance depends on whether a reasonable investor, with knowledge of all relevant facts and circumstances, can conclude that the auditor is not capable of exercising objective and impartial judgment.Mod B-20SEC & PCAOB Independence RulesThe SEC and PCAOB rules prohibit or place restrictions on the following types of nonaudit services provided to audit clients:Financial information systems design and implementation;Appraisal or valuation services;Actuarial services;Internal audit services;Management functions;Human resources;Broker-dealer services;Legal services;Expert services;Any service for an audit client for a contingent fee or commission;Tax services that are based on judicial proceedings or aggressive interpretations of tax law;Planning or opining on the tax consequence of a transaction;Tax services for key company executives.Mod B-21SEC & PCAOB Independence RulesSEC rules require that companies (not auditors) disclose the following in proxy statements delivered to their shareholders :Total audit fees to the public accounting firm for the annual audit and the reviews of quarterly financial information;Total fees to the public accounting firm for tax and other advisory work;Whether the audit committee or the board of directors considered the public accounting firm’s advisory work to be compatible with maintaining the auditor’s independence;If more than 50 percent, the percentage of the audit hours performed by persons other than the principal auditor’s full-time, permanent employees.Mod B-22AICPA Code of Professional ConductRule 102: Integrity and ObjectivityCPAs must remain free of conflicts of interestA conflict of interest may exist when there is a significant relationship with a person, entity, product, or service that could be viewed as impairing the members objectivityDo not knowingly misrepresent facts.Do not subordinate judgments to others.Do not knowingly make false or misleading entries in an entity’s financial records.Mod B-23AICPA Code of Professional ConductRule 102: Integrity and ObjectivityIf disagreements exist concerning the preparation of financial statements or the recording of transactions, accept the supervisor’s position if acceptable.Report to higher level if supervisor’s position is not acceptable.Consider resigning if upper management will not take appropriate action.Mod B-24AICPA Code of Professional ConductRule 201: General Standards; Rule 202: Compliance with Standards; & Rule 203: Compliance with Accounting PrinciplesFollow professional standards and interpretations.Perform only those services that can be completed with professional competence.Exercise due care.Adequately plan and supervise all engagements.Obtain sufficient relevant data to afford a reasonable basis for all conclusions and recommendations.Mod B-25AICPA Code of Professional ConductRule 301: Confidentiality of Client InformationA CPA cannot disclose confidential information without client's consent.Exceptions:To remain in compliance with standards (Rule 203)If workpapers are subpoenaed by courtAs part of a PCAOB peer or quality review of practiceAs part of an ethics violation for a state board of accountancy investigationMod B-26AICPA Code of Professional ConductRule 302: Contingent Fees Contingent Fees: Those fees based on a particular finding or outcomeNot permitted for attest engagementsNot contingent if:Fixed by courtsBased on hours worked or services providedAllowed for non-attest (tax, consulting, litigation support) engagementsMod B-27AICPA Code of Professional ConductRule 501: Acts DiscreditableA member shall not commit an act discreditable to the profession:DiscriminationFailure to follow GAGAS on a Governmental auditMaking false or misleading journal entriesFailure to met requirements of a Governmental body, commission, or regulatory bodyFailure to file personal income tax returnDisclosure of CPA examination questions or answersMod B-28AICPA Code of Professional ConductRule 502: Advertising and SolicitationAdvertising and solicitation of new clients is permitted.Advertising: Cannot be “false, misleading, or deceptive” Cannot create false or unjustified expectations of favorable resultsCannot state ability to influence third partiesCannot underestimate fees (“low balling”)Mod B-29AICPA Code of Professional ConductRule 503: Commissions and Referral FeesCommissions: recommending the products or services of clients or third parties (non-CPA)permitted for non-attest, if disclosedprohibited for attest engagementsReferrals: recommending the services of CPAspermitted for any engagement, if disclosedMod B-30AICPA Code of Professional ConductRule 505: Form of Organization and NameA firm can practice in any form permitted by state including: Limited Liability Partnership (LLP) Limited Liability Corporation (LLC)Firm name should not be misleading.All partners must be CPAs or members of AICPA if included in firm name. Mod B-31International Ethics Standards Board for Accountants (IESBA) CodeThe IESBA Code must be followed by auditors whenever an audit engagement is completed for a multinational client.The importance has increased dramatically in recent years.As a result, the PEEC of the AICPA has recently undertaken a project to recodify the AICPA Code of Professional Conduct to be in convergence with the IESB ethical standards.Project is expected to be completed in 2012/2013Mod B-32