Chapter 19-Auditing

Chapter 19-Auditing - Chapter 19-Ethics and...

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Unformatted text preview: Chapter 19-Ethics and Independence-Ethics- system or code of conduct based on moral duties and obligations that indicate how an individual should behave in society- Professionalism- the conduct, aims, or qualities that characterize a profession or professional person-Ethics involves the set of moral standards for right or wrong that a person, group or a society develops.- The Code of Professional ethics concerns right and wrong behavior for CPAs- Rules are set so that: 1. Users of the professional services know what to expect why they buy the service 2. Members of the profession know what behavior is acceptable 3. The profession can use the rules to monitor the actions and apply disciplinary actions Things to consider in ethical situations: o Consequences of his action on all affected parties o Whether any rules exist that might require a particular action o What consequences would occur if everyone broke the rule o Cost and benefits need to be assessed in terms of the public, stockholders, CPA firm, and managements reputation o Consider the rights of stockholders o Whether the decision yields advantages to some at the expense of others o Avoid favoring the interests of any individual or group o Integrity and objectivity require that self-interest be not placed ahead of public interest AICPA- AICPA-American Association of Public Accountants- Private, Nongovernmental agency that established auditing standards and a Code of Professional Conduct -Code of Professional Conduct-maps out the primary areas that ethical conduct is expected of public accountants -Has the authority to require its members to comply with the code; but government has held that all CPAs, public or private, member or nonmember of AICPA have to follow the code-AICPA provides the broadest map of the areas of professionalism serves as a framework-Predecessor of the AICPA AAPA (American Association of Public Accountants) SEC- Mission to protect investors and maintain the integrity of the capital markets - Has legal authority to oversee the public accounting profession -Allowed the FASB and ASB (Auditing Standards Board, part of the AICPA)to set accounting and auditing standards -SEC exercises influence in the standard-setting process and established standards of its own -SEC delegates its authority to set standards for audits of public companies to PCAOB that the SEC reviews and approves before they are effective PCAOB-PCAOB- Public Company Accounting Oversight Board -Adopted the professional standards of the AICPA and the Code of Professional Conduct -Has additional stringent standards of professional conduct in the area of auditor independence which must be followed by public companies Private Company Audit...
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Chapter 19-Auditing - Chapter 19-Ethics and...

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