Ethics in Accounting - Ethics in Accounting 1 Statutory...

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Ethics in Accounting 1) Statutory Audit Professional Ethics -Independence -Confidentiality -Economic restriction “Independence”- in both fact and appearance A. Auditors are prohibited from having any direct financial interest in an audit client through share ownership or loans to or from the organization B. They as well as immediate family members, are prohibited from serving as a director or member of an audit client’s management C. While public accounting firms are allowed to perform multiple services such as auditing and consulting for the same client, they may not become involved in managerial decision making. “Confidentiality”-of information obtained during the performance of an audit A. Auditors are prohibitd from divulging such information, except as required by law
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Unformatted text preview: B. Cannot use such information for personal gain. “Economic restrictions” There is a causal connection between the auditor’s failure to perform his or her duty and injury to the client 4. The client suffers actual loss The burden of proof for the above four requisites is on the client to show their existence. Technically, the client is the corporation as a legal entity that is hired the auditor, while in some cases, such as whom an auditor fails to uncover a material management fraud, the interests of shareholders diverge from those of managers and directors. In that case, the shareholders themselves, acting as a body, may be deemed to constitute the ‘client’....
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