Chapter 3: Judgmental and Ethical Decision-Making Frameworks and Associated Professional
Chapter 3: Judgmental and Ethical Decision-Making
Frameworks and Associated Professional Standards
1. When making complex, difficult, and important decisions audit professionals typically do not benefit from a
structured approach to their decision-making because they need to remain open-minded.
2. Professional judgment involves applying relevant professional knowledge and experience to unique and
potentially uncertain facts and circumstances in order to reach a conclusion or make a decision.
3. As accounting standards become less rules-based and more principles-based, the role of professional
judgement in decision-making will become less important.
4. Individual state boards of accountancy and state societies of CPAs have mostly adopted Rules of Conduct
established by the AICPA.
5. Public confidence is mostly maintained by the public accounting profession through integrity based on
personal moral standards and it is reinforced by codes of conduct.
6. It is not required for an individual to uphold the code of professional conduct in order to become licensed as a
7. One issue that may threaten independence is that of the time pressure placed on the auditor when an audit is
8. The Sarbanes-Oxley Act of 2002 amends the Securities and Exchange Act of 1934 and places prohibitions on
certain consulting services by auditors for their audit clients.
9. An auditor of a public client may perform internal audit outsourcing services for a client because such
services may overlap with external audit functions.
10. An auditor of a public client may assist a client in designing and implementing its enterprise resource
planning system in order to ensure that controls over the system exist prior to the audit.
11. The SEC is concerned with situations between an auditor and a public company that allow the auditor to act
as management of the client.
12. The Code of Professional Conduct was adopted by the AICPA membership to provide guidance and rules to
only its members in public practice.
13. The AICPA Rules of Conduct govern the performance of CPAs in carrying out their public responsibilities.
14. Confidentiality is the cornerstone of the auditing profession.
15. The AICPA independence rules only apply for attestation clients.
16. The AICPA's Code of Professional Conduct defines direct ownership as an investment of one percent or
more of a client's organization.
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