Chapter 4 - Professional Ethics

N companies must disclose whether or not the audit

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n Companies must disclose whether or not the audit committee includes at least one financial expert. n Employment: n The SEC has added a one year “cooling off ” period before a member of the audit engagement team can work for the client in certain key management positions. n Partner Rotation: n The Sarbanes-Oxley Act requires that the lead and concurring audit partner rotate off the audit engagement after a period of five years.
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+ Other Rules n General Standards (Section 200): n Auditors must follow GAAS (10 standards and other) n Rule 203: do not say things are in accordance with GAAP if they are not n Responsibilities to Clients (Section 300): n Auditor-Client Confidentiality n Exceptions: n following GAAS n valid subpoena n peer review n disciplinary investigations n client permission
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+ Other Rules n Other (Section 500): n No discreditable acts! n retention of client records n discrimination/harassment n failure to follow GAAS n negligence n cheating on the CPA exam n cheating on taxes (including failure to file a tax return) n Be careful in seeking to obtain clients n advertising and solicitation n no false, misleading, or deceptive actions n
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+ Sanctions for Violations n AICPA Professional Ethics Division n Responsible for investigations n Decide on disciplinary actions n Levels of Disciplinary Action n Less serious offense – remedial or corrective action required n More serious offense – before Joint Trial Board n Person n suspend (for usually 2 yrs) or expel members n State board can revoke CPA certificate or license to practice n CPA firms n SEC can suspend from taking new public clients and impose fines
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+ Internal Auditors Code of ethics 1. Integrity 1.1. Shall perform their work with honesty, diligence, and responsibility. 1.2. Shall observe the law and make disclosures expected by the law and the profession.
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n Companies must disclose whether or not the audit...

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