Chapter 03 - Chapter 03 - Professional Ethics CHAPTER 3...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Chapter 03 - Professional Ethics CHAPTER 3 Professional Ethics 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 ones 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 ones 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-reviewUsing as a part of the attest engagement evidence that was obtained on a nonattest engagement. 34 Chapter 03 - Professional Ethics (2) AdvocacyActions that promote an attest clients interest. (3) Adverse interestActions between the public accountant and the client that are in opposition. (4) FamiliarityHaving a close or longstanding relationship with client personnel or with individuals who performed nonattest services. (5) Undue influenceAn attest clients management coerces the accountant or exercises excessive influence over the accountant. (6) Financial self-interestA potential benefit to the accountant from a financial interest in, or some other financial relationship with an attest client. (7) Management participationThe 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 A CPA would have an indirect financial interest in an audit client if he or she had an investment in another entity which, in turn, had an interest in the audit client. Examples might include (1) an investment in a mutual fund which owns stock of the audit client, (2) investment in another corporation which owns securities of the audit client, and (3) ownership of shares in a bank which...
View Full Document

This note was uploaded on 08/28/2011 for the course ACCOUNTING 423 taught by Professor K during the Spring '11 term at San Diego.

Page1 / 20

Chapter 03 - Chapter 03 - Professional Ethics CHAPTER 3...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online