AICPA ETHICS studys exams QUESTIONS AND
ANSWERS SURE A+
✔✔Conceptual Framework - ✔✔employs a "threats and safeguards" approach to
analyzing threats to compliance with the ethics rules that members must employ when
evaluating a matter that the code does not specifically address
1. Identify threat(s) to compliance with one or more rules
2. Evaluate whether the threat (or threats in the aggregate, if applicable) is significant
--if the threat is not significant, stop - no further consideration is needed
--if the threat is significant, proceed to 3
3. Identify and apply safeguards
--if safeguard(s) would eliminate the threat or reduce the threat to an acceptable level,
proceed with professional services or engagement
--if a safeguard(s) is not available or insufficient (that is, does not reduce threat(s) to
acceptable level), decline or discontinue professional service or resign from the
engagement
Definitions
Threats: relationships or circumstances that could compromise a member's compliance
with the rules. These include adverse interest; advocacy, familiarity, management
participation, self-interest, self-review, and undue influence
Acceptable level: a level at which a reasonable and informed third party who is aware of
the relevant information would be expected to conclude that a member's compliance
with the rules is not compromised
Safeguard: may partially or completely eliminate a threat or diminish the influence of a
threat. To be effective, safeguards should eliminate the threat or reduce it to an
acceptable level.
✔✔Conflicts of Interest - ✔✔relationship in which the client or other appropriate parties
may view as impairing the member's objectivity
adverse interest or self-interest threats may exist to the "integrity and objectivity rule"
, Considerations - Would the situation cause third parties to questions ethics?
Ensure transparency and compliance with the code.
All potential conflicts should be discussed with the appropriate parties.
Be able to answer Yes to all 3 in order to move forward:
(1) Do you believe you can perform service with objectivity?
(2) Do third parties believe you can perform service with objectivity?
(3)Does third party grant permission?
✔✔Competence and Due Care - ✔✔-strive to improve competence and the quality of
services, and discharge professional responsibilities to the best of your ability
-each CPA should assess professional competence by evaluating whether his or her
education, experience, and judgment are adequate for the responsibilities assumed
-diligence imposes the responsibility to render services promptly and carefully, to be
thorough, and to observe applicable technical and ethical standards
-due care requires a CPA to adequately plan and supervise professional activities
AICPA Interpretation of Competence:
-appropriate technical qualifications
-knowledge of standards and techniques, and ability to exercise sound judgement in
applying knowledge and performance of services
-can perform additional research or consulting with others to gain sufficient competence
✔✔Due Care - ✔✔-quest for excellence
-standard of due care requires members to:
--discharge professional responsibilities with competence and diligence,
--perform professional services to the best of one's abilities, and
--serve the best interests of those for whom services are performed, consistent with the
profession's responsibility to the public
-provide client with a level of service that is consistent with the level of care that a
"prudent professional" would exercise (consistent with profession's standards)
✔✔The Promotion Case Study - ✔✔-wanted to be CFO, applied for job at new company
-mentioned MBA, but he didn't have one
-company wanted to go public so asked him for experience working with public
companies -- his response was vaguely true but not exactly accurate given the context
of the question
Consider - What is the most likely overall effect of your decision on the company's
management team, employees, and other key stakeholders?
✔✔Accounting Principles - ✔✔-do not say that financial data is presented in conformity
with GAAP if such data contains any departure from an accounting principle
ANSWERS SURE A+
✔✔Conceptual Framework - ✔✔employs a "threats and safeguards" approach to
analyzing threats to compliance with the ethics rules that members must employ when
evaluating a matter that the code does not specifically address
1. Identify threat(s) to compliance with one or more rules
2. Evaluate whether the threat (or threats in the aggregate, if applicable) is significant
--if the threat is not significant, stop - no further consideration is needed
--if the threat is significant, proceed to 3
3. Identify and apply safeguards
--if safeguard(s) would eliminate the threat or reduce the threat to an acceptable level,
proceed with professional services or engagement
--if a safeguard(s) is not available or insufficient (that is, does not reduce threat(s) to
acceptable level), decline or discontinue professional service or resign from the
engagement
Definitions
Threats: relationships or circumstances that could compromise a member's compliance
with the rules. These include adverse interest; advocacy, familiarity, management
participation, self-interest, self-review, and undue influence
Acceptable level: a level at which a reasonable and informed third party who is aware of
the relevant information would be expected to conclude that a member's compliance
with the rules is not compromised
Safeguard: may partially or completely eliminate a threat or diminish the influence of a
threat. To be effective, safeguards should eliminate the threat or reduce it to an
acceptable level.
✔✔Conflicts of Interest - ✔✔relationship in which the client or other appropriate parties
may view as impairing the member's objectivity
adverse interest or self-interest threats may exist to the "integrity and objectivity rule"
, Considerations - Would the situation cause third parties to questions ethics?
Ensure transparency and compliance with the code.
All potential conflicts should be discussed with the appropriate parties.
Be able to answer Yes to all 3 in order to move forward:
(1) Do you believe you can perform service with objectivity?
(2) Do third parties believe you can perform service with objectivity?
(3)Does third party grant permission?
✔✔Competence and Due Care - ✔✔-strive to improve competence and the quality of
services, and discharge professional responsibilities to the best of your ability
-each CPA should assess professional competence by evaluating whether his or her
education, experience, and judgment are adequate for the responsibilities assumed
-diligence imposes the responsibility to render services promptly and carefully, to be
thorough, and to observe applicable technical and ethical standards
-due care requires a CPA to adequately plan and supervise professional activities
AICPA Interpretation of Competence:
-appropriate technical qualifications
-knowledge of standards and techniques, and ability to exercise sound judgement in
applying knowledge and performance of services
-can perform additional research or consulting with others to gain sufficient competence
✔✔Due Care - ✔✔-quest for excellence
-standard of due care requires members to:
--discharge professional responsibilities with competence and diligence,
--perform professional services to the best of one's abilities, and
--serve the best interests of those for whom services are performed, consistent with the
profession's responsibility to the public
-provide client with a level of service that is consistent with the level of care that a
"prudent professional" would exercise (consistent with profession's standards)
✔✔The Promotion Case Study - ✔✔-wanted to be CFO, applied for job at new company
-mentioned MBA, but he didn't have one
-company wanted to go public so asked him for experience working with public
companies -- his response was vaguely true but not exactly accurate given the context
of the question
Consider - What is the most likely overall effect of your decision on the company's
management team, employees, and other key stakeholders?
✔✔Accounting Principles - ✔✔-do not say that financial data is presented in conformity
with GAAP if such data contains any departure from an accounting principle
