AICPA Final Exam
4 parts - ANS-Ethical concepts
Rules of behavior
Interpretations
Ethical rulings
A Case Situation - ANS-In 1999 a CPA recommended an funding to a tax customer and
obtained a commission from the promoter. Client now wishes to attain bank financing and
has asked the CPA to perform a review of its F.S.'s for the yr ended December 31, 1999. Is
this a violation?
Yes, as recommendation and receipt of commission become obtained at some point of the
period blanketed via the monetary statements
AICPA Also Recently Adopted a "Covered Person" Independence Perspective -
ANS-Previous AICPA policies took a "firm extensive" Independence angle
Intended to modernize policies for auditor independence concerning:
Investments in audit customers
Employment relationships
Scope of services furnished to SEC clients
Old regulations were obsolete and unnecessarily restrictive, given growing numbers of dual
profits families
Firm wide attitude:
Partners couldn't personal any stock in any client corporation
Managers and beneath couldn't very own inventory of the consumer if they were in the office
doing the audit for the customer
For example: Joe Abston, manager in Honolulu office, transferred to Dallas office and
needed to promote Dr Pepper
Can a CPA Be Independent If Both the CPA and an Audit Client Own Stock in Another
Entity? - ANS-This is a joint undertaking; the 2 have a common hobby (an objectivity
problem)
Assume the subsequent:
CPA owns immaterial amount of Jackson Company
Audit consumer also owns Jackson Company stock
If customer investment > five% of customer's total property or pre-tax working profits,
whichever is extra restrictive, CPA isn't unbiased
Can a CPA Perform Write-up Work and be Independent of an Attest Client? - ANS-For
non-SEC clients, sure if:
CPA retains the arrival of not being an worker of the customer
Client need to be given responsibility for financial statements
CPA does now not expect position of worker or management:
, Cannot consummate transactions
Cannot have custody of assets
Cannot prepare source documents
Cannot alternate purchaser facts without concurrence
Not unbiased if an SEC client
Can An Auditor Own Shares in a Mutual Fund Which Owns Shares in an Audit Client? -
ANS-This is an oblique interest in customer securities
If material to CPA, independence might be impaired (ET 191.35)
Practically speakme, such might not often be material
Commission Examples and Issues - ANS-CPA may want to acquire a commission for
recommending a non attest consumer's software or hardware to another celebration
CPA may want to get hold of a fee for recommending actual estate, insurance, or securities
to a non attest client via a third celebration
Why does independence count number?
We're in a commercial enterprise relationship with a celebration (the client) toward whom we
are required to be independent and goal
Commissions: an objectivity dilemma?
Objectivity: some sense we should not receive commissions, even from non attest
customers. Public thinks of CPA's as being objective. If a person can definitely be goal once
they recommend one product over any other when the previous can pay a larger
commission, I would love to peer that! [A state board of Accountancy member]
Competence - ANS-The accountant need to have ok training
The accountant need to maintain expert competence by ongoing development of expertise
and abilties
The accountant need to perform obligations within the auspices of modern-day laws,
guidelines and standards.
The accountant must be make clear reviews and appropriate tips.
The accountant have to apprehend that he/she does not know everything and get assist
from others while wanted.
Confidentiality - ANS-There are exact reasons why a few
understanding should simplest be acknowledged through some human beings.
Accountants ought to chorus from disclosing exclusive statistics acquired in the path in their
work except
When legal
When legally obligated
Accountants are forbidden from using personal statistics received inside the path in their
paintings for unethical or unlawful benefit, both in person or via 0.33 events.
Contingent Fees - ANS-What is a contingent rate?
What is an attest client?
A consumer for whom we carry out:
an audit or evaluation file
A compilation file not containing a loss of independence paragraph
4 parts - ANS-Ethical concepts
Rules of behavior
Interpretations
Ethical rulings
A Case Situation - ANS-In 1999 a CPA recommended an funding to a tax customer and
obtained a commission from the promoter. Client now wishes to attain bank financing and
has asked the CPA to perform a review of its F.S.'s for the yr ended December 31, 1999. Is
this a violation?
Yes, as recommendation and receipt of commission become obtained at some point of the
period blanketed via the monetary statements
AICPA Also Recently Adopted a "Covered Person" Independence Perspective -
ANS-Previous AICPA policies took a "firm extensive" Independence angle
Intended to modernize policies for auditor independence concerning:
Investments in audit customers
Employment relationships
Scope of services furnished to SEC clients
Old regulations were obsolete and unnecessarily restrictive, given growing numbers of dual
profits families
Firm wide attitude:
Partners couldn't personal any stock in any client corporation
Managers and beneath couldn't very own inventory of the consumer if they were in the office
doing the audit for the customer
For example: Joe Abston, manager in Honolulu office, transferred to Dallas office and
needed to promote Dr Pepper
Can a CPA Be Independent If Both the CPA and an Audit Client Own Stock in Another
Entity? - ANS-This is a joint undertaking; the 2 have a common hobby (an objectivity
problem)
Assume the subsequent:
CPA owns immaterial amount of Jackson Company
Audit consumer also owns Jackson Company stock
If customer investment > five% of customer's total property or pre-tax working profits,
whichever is extra restrictive, CPA isn't unbiased
Can a CPA Perform Write-up Work and be Independent of an Attest Client? - ANS-For
non-SEC clients, sure if:
CPA retains the arrival of not being an worker of the customer
Client need to be given responsibility for financial statements
CPA does now not expect position of worker or management:
, Cannot consummate transactions
Cannot have custody of assets
Cannot prepare source documents
Cannot alternate purchaser facts without concurrence
Not unbiased if an SEC client
Can An Auditor Own Shares in a Mutual Fund Which Owns Shares in an Audit Client? -
ANS-This is an oblique interest in customer securities
If material to CPA, independence might be impaired (ET 191.35)
Practically speakme, such might not often be material
Commission Examples and Issues - ANS-CPA may want to acquire a commission for
recommending a non attest consumer's software or hardware to another celebration
CPA may want to get hold of a fee for recommending actual estate, insurance, or securities
to a non attest client via a third celebration
Why does independence count number?
We're in a commercial enterprise relationship with a celebration (the client) toward whom we
are required to be independent and goal
Commissions: an objectivity dilemma?
Objectivity: some sense we should not receive commissions, even from non attest
customers. Public thinks of CPA's as being objective. If a person can definitely be goal once
they recommend one product over any other when the previous can pay a larger
commission, I would love to peer that! [A state board of Accountancy member]
Competence - ANS-The accountant need to have ok training
The accountant need to maintain expert competence by ongoing development of expertise
and abilties
The accountant need to perform obligations within the auspices of modern-day laws,
guidelines and standards.
The accountant must be make clear reviews and appropriate tips.
The accountant have to apprehend that he/she does not know everything and get assist
from others while wanted.
Confidentiality - ANS-There are exact reasons why a few
understanding should simplest be acknowledged through some human beings.
Accountants ought to chorus from disclosing exclusive statistics acquired in the path in their
work except
When legal
When legally obligated
Accountants are forbidden from using personal statistics received inside the path in their
paintings for unethical or unlawful benefit, both in person or via 0.33 events.
Contingent Fees - ANS-What is a contingent rate?
What is an attest client?
A consumer for whom we carry out:
an audit or evaluation file
A compilation file not containing a loss of independence paragraph
