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3) Audit committees must have at least one member designated as a financial
PCAOB Interim Independence Standards
1) i. The PCAOB adopted AICPA Conduct Rule 101 as well as two pronouncements
of the now-defunct Independence Standards Board (ISB). They also issued a
number of specific independence rules that apply to registered public
accounting firms. However, these are parallel, in most cases, with the AICPA
Code of Professional Conduct.
Management’s Financial Statement Responsibility
1) j. The CEO and CFO of a public company must provide a statement to accompany
the audit report. This statement certifies the appropriateness of the financial
statements and disclosures. However, a violation of this requirement must be
knowing and intentional.
1) Sarbanes-Oxley created a new crime for securities fraud that imposes penalties
of fines and imprisonment, extends the statute of limitations on securities fraud
claims, and makes it a felony to create or destroy documents to impede a
federal investigation. Copyright © 2012 Gleim Publications, Inc., and/or Gleim Internet, Inc. All rights reserved. Duplication prohibited. www.gleim.com 24 SU 2: Professional Responsibilities 2. Department of Labor
a. The DOL requires auditors to be independent for audits of pension funds administered
under the Employee Retirement Income Security Act of 1974 (ERISA). The AICPA Content Specification Outlines (CSOs) require candidates to “demonstrate an awareness” of the
international ethics standards. As with other ethics standards, in most cases these parallel the AICPA Code
of Professional Conduct. The following summary of the standards is presented at the awareness level. 3. IFAC Code of Ethics for Professional Accountants
a. b. Under the auspices of the International Federation of Accountants (IFAC), the
International Ethics Standards Board for Accountants (IESBA) has issued a
Code of Ethics for Professional Accountants. This outline addresses fundamental
principles followed by standards for accountants in public practice.
1) c. Integrity. A professional accountant must be straightforward and honest in all
professional and business relationships.
2) Objectivity. A professional accountant must not allow bias, conflict of interest,
or undue influence of others to override professional or business judgments.
3) Professional competence and due care. A professional accountant must
maintain professional knowledge and skill at the level required to ensure that a
client or employer receives competent professional services based on current
developments in practice, legislation, and techniques. (S)he also must act
diligently and in accordance with applicable technical and professional
4) Confidentiality. A professional accountant must respect the confidentiality of
information acquired as a result of professional and business relationships.
Thus, (s)he must not disclose any such information to third parties without
proper and specific authority, unless a legal or professional right or duty exists
to disclose. Moreover, (s)he must not use the information for the personal
advantage of the professional accountant or third parties.
5) Professional behavior. A professional accountant must comply with relevant
laws and regulations and avoid any action that discredits the profession.
1) Threats to compliance with fundamental principles may arise from many
circumstances and relationships. Threats may involve the following:
b) 2) Self-interest (for example, a direct financial interest in the client)
Self-review (for example, reporting on the effectiveness of a financial
accounting system after designing it)
c) Advocacy (for example, advocating on behalf of a client in litigation)
d) Familiarity (for example, a close or immediate family member of a person
on the engagement team is a director of the client)
e) Intimidation (for example, the client states that it will not give a consulting
contract to the firm if it disagrees with a choice of an accounting principle)
Safeguards eliminate or reduce threats to an acceptable level. Safeguards
include the following:
a) Safeguards created by the profession, legislation, or regulation (for
example, education requirements, professional standards, and external
review) Copyright © 2012 Gleim Publications, Inc., and/or Gleim Internet, Inc. All rights reserved. Duplication prohibited. www.gleim.com SU 2: Professional Responsibilities 25 b) d. Safeguards in the work environment (for example, firm-wide safeguards,
such as leadership that promotes compliance with fundamental principles,
engagement-specific safeguards, such as review of the work by an
accountant, and safeguards in the client’s systems, such as a governance
body that appropriately oversees the firm’s work)
Section 210 – Professional Appointment. Before accepting a new client, a
professional accountant must determine whether acceptance would create any
threats to compli...
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- Spring '13