Solutions%20Chpt%2003%20WP17ed%20students

Solutions%20Chpt%2003%20WP17ed%20students - Chapter 03 -...

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Chapter 03 - Professional Ethics 3-1 CHAPTER 3 Professional Ethics 3-1 through 3-23, 3-26, 3-28 through 3-32 (MC), 3-34, 3-38, 3-43. Review Questions 3-1 An ethical dilemma is a situation that an individual faces involving a decision about appropriate behavior. Ethical dilemmas generally involve situations in which the welfare of one or more other individuals is affected by the results of one’s decision. 3-2 Internal and external standards represent the two major types of constraints on decisions that involve ethical issues. Examples of internal standards are individuals' views on the importance of truthfulness, fairness, loyalty, and caring for others. External standards are those that are imposed upon individuals by society, peers, organizations, employers, or one’s profession. For example, the AICPA Code of Professional Conduct is an external constraint on members of the AICPA. 3-3 The basic purpose of a professional code of ethics is to provide members of a profession with guidelines for maintaining a professional attitude and conducting themselves in a manner that will enhance the stature of their discipline. 3-4 The two parts of the AICPA Code of Professional Conduct are: (1) Principles —goal-oriented and aspirational guidelines which address members' responsibilities, the public interest, integrity and objectivity, independence, due care, and the scope and nature of services. (2) Rules —more detailed regulations which support the principles. 3-5 The categories of threats to independence include (only three required): (1) Self-review—Using as a part of the attest engagement evidence that was obtained on a nonattest engagement. (2) Advocacy—Actions that promote an attest client’s interest. (3) Adverse interest—Actions between the public accountant and the client that are in opposition.
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Chapter 03 - Professional Ethics 3-2 (4) Familiarity—Having a close or longstanding relationship with client personnel or with individuals who performed nonattest services. (5) Undue influence—An attest client’s management coerces the accountant or exercises excessive influence over the accountant. (6) Financial self-interest—A potential benefit to the accountant from a financial interest in, or some other financial relationship with an attest client. (7) Management participation—The accountant taking on the role of client management or otherwise performing management functions. 3-6 Rule 202 of the AICPA Code of Professional Conduct requires CPAs to adhere to appropriate professional standards in the performance of various professional services. In the case of financial statement audits those standards are the generally accepted auditing standards. 3-7
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This note was uploaded on 11/22/2010 for the course BUSINESS 4230 taught by Professor Dee during the Spring '10 term at Community College of Denver.

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Solutions%20Chpt%2003%20WP17ed%20students - Chapter 03 -...

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