Before accepting a new client a professional

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Unformatted text preview: ance with the fundamental principles. 1) The principle of professional competence and due care imposes an obligation on a professional accountant to provide only those services that (s)he is competent to perform. a) e. f. g. When a professional accountant intends to rely on the advice or work of an expert, (s)he determines whether such reliance is warranted by reputation, expertise, etc. 2) A professional accountant who is asked to replace another must determine whether there are any reasons, professional or otherwise, for not accepting the engagement. 3) An existing accountant may be prevented by confidentiality from discussing the affairs of a client with a proposed accountant. 4) A professional accountant will generally need to obtain the client’s permission, preferably in writing, to initiate discussion with an existing accountant. Section 220 – Conflicts of Interest. A professional accountant must take reasonable steps to identify circumstances that could pose a conflict of interest. Section 230 – Second Opinions. Providing a second opinion on the application of standards or principles to specific circumstances or transactions on behalf of an entity that is not an existing client may create threats to compliance with the fundamental principles. Section 240 – Fees and Other Types of Remuneration. Fees should not be so low that it may be difficult to perform the engagement in accordance with applicable technical and professional standards for that price. 1) 2) 3) 4) The client should be aware of the terms of the engagement, the basis on which fees are charged, and which services are covered by the fees. Contingent fees may create a self-interest threat to objectivity depending on factors including a) The nature of the engagement; b) The range of amounts; c) The basis for the fee; and, d) Whether the result is to be reviewed by an independent third party. A contingent fee is prohibited by a firm for an audit engagement or for a nonassurance service provided to an audit client. A professional accountant may receive a referral fee or commission relating to a client. a) b) A professional accountant also may pay a referral fee to obtain a client. Examples of safeguards include i) ii) c) Disclosing to the client any such arrangements Obtaining advance agreement from the client for commission arrangements in connection with the sale by a third party of goods or services to the client Purchasing a firm by making payments to individuals formerly owning the firm does not constitute paying commissions or referral fees. Copyright © 2012 Gleim Publications, Inc., and/or Gleim Internet, Inc. All rights reserved. Duplication prohibited. www.gleim.com 26 SU 2: Professional Responsibilities h. i. Section 250 – Marketing Professional Services. A professional accountant must not bring the profession into disrepute when marketing professional services. (S)he must be honest and truthful and not make exaggerated claims or disparaging references or unsubstantiated comparisons to the work of another. Section 260 – Gifts and Hospitality. A professional accountant in public practice, or an immediate or close family member, may be offered gifts and hospitality from a client. 1) j. If a reasonable and informed third party would consider them trivial and inconsequential, they may be accepted. 2) But if the resulting threats to compliance with fundamental principles cannot be eliminated or reduced to an acceptable level through safeguards, a professional accountant must not accept such an offer. Section 270 – Custody of Client Assets. A professional accountant must not assume custody of client assets unless permitted by law and in compliance with any additional legal duties imposed on a professional accountant holding such assets. 1) k. l. A professional accountant entrusted with assets belonging to others must a) Keep them separate from personal or firm assets b) Use them only for the purpose for which they are intended c) Be ready to account for them and any income d) Comply with all relevant laws and regulations 2) A professional accountant must make appropriate inquiries about the source of such assets and consider legal and regulatory obligations. Section 280 – Objectivity–All Services. A professional accountant must determine when providing any professional service whether there are threats to compliance with the fundamental principle of objectivity resulting from having interests in, or relationships with, a client or its directors, officers, or employees. Section 290 – Independence: Audits and Reviews 1) If a firm is a network firm, it must be independent of the audit clients of the other firms within the network. a) 2) 3) 4) 5) 6) 7) The judgment as to whether the larger structure is a network is based on all the specific facts and circumstances. The professional accountant must document conclusions regarding compliance with independence requirements and the substance of any relevant discussions that support those conclusions. Independence from the audit client is required during both the engagement period and the period covered by the financial...
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This note was uploaded on 04/02/2013 for the course ACCT 7100 taught by Professor Swanson during the Spring '13 term at Valdosta State University .

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