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Unformatted text preview: 1 Chapter 5 Professional Ethics Review Questions 5-1 The six core ethical values described by the Josephson Institute are: 1. Trustworthiness 4. Fairness 2. Respect 5. Caring 3. Responsibility 6. Citizenship There are many other potential sources of ethical values, including laws and regulations, church doctrines, codes of professional ethics, and individual organizations codes of conduct. 5-2 An ethical dilemma is a situation that a person faces in which a decision must be made about the appropriate behavior. There are many possible ethical dilemmas that one can face, such as finding a wallet containing money, or dealing with a supervisor who asks you to work hours without recording them. An ethical dilemma can be resolved using the six-step approach outlined on p. 80 of the text. The six steps are: 1. Obtain the relevant facts. 2. Identify the ethical issues from the facts. 3. Determine who is affected by the outcome of the dilemma and how each person or group is affected. 4. Identify the alternatives available to the person who must resolve the dilemma. 5. Identify the likely consequence of each alternative. 6. Decide the appropriate action. 5-3 There is a special need for ethical behavior by professionals to maintain public confidence in the profession, and in the services provided by members of that profession. The ethical requirements for CPAs are similar to the ethical requirements of other professions. All professionals are expected to be competent, perform services with due professional care, and recognize their responsibility to clients. The major difference between other professional groups and CPAs is independence. Because CPAs have a responsibility to financial statement users, it is essential that auditors be independent in fact and appearance. Most other professionals, such as attorneys, are expected to be an advocate for their clients. 5-1 5-4 PART PURPOSE 1. Principles of Professional Conduct 1. Provide ideal standards of ethical conduct and help practitioners understand the ideal conduct of a CPA. 2. Rules of conduct 2. Provide minimum standards of ethical conduct stated as specific rules. 3. Interpretation of the rules of conduct 3. Provide formal interpretations of the rules of conduct to answer questions that frequently arise about the rules of conduct. 4. Ethical rulings 4. Provide more detailed guidance to practitioners about interpretation of the rules of conduct for less commonly raised questions. 5-5 Independence in fact exists when the auditor is actually able to maintain an unbiased attitude throughout the audit, whereas independence in appearance is dependent on others' interpretation of this independence and hence their faith in the auditor....
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- Spring '10