Auditing and Assurance Services

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19-33 a. The Code of Professional Conduct applies to all parties who are members of the AICPA or have CPA licenses, whether or not they are practicing public accounting. There are, however, a number of interpretations of the Code of Professional Conduct (for example, 102-3 and 102-5) that are directed specifically toward individual CPAs working outside of public accounting. b. This, of course, is a judgment question. Some practitioners believe that the Code of Conduct should be applied the same to all individuals who possess a CPA certificate, while others do not. 19.34 a. No independence rule is violated because Adrian does not occupy a “financial reporting oversight role” for Swiss Precision Tooling; therefore the one-year “cooling-off” period is not necessary. b. No independence rule is violated because although Susana does occupy a “financial reporting oversight role,” she was away from the firm for more than one year before taking her new assignment. c. As long as Janay is not providing the appraisal service for the client, but only as part of the audit to verify the valuation assertion, no violation has been committed. If the appraisal service were performed on behalf of the client, and not strictly for the purposes of verifying the client’s estimates for audit purposes, then this would violate independence standards. d. No violation exists as long as all of the services are performed in accordance with the SEC’s independence rules, were accepted by the client’s audit committee, and the audit partner does not receive compensation based on selling engagements for nonaudit services. 19-35 1. a. If the auditor records the “social” time, she may suffer some consequences from her supervisor. She may also cause the team to go over budget. On the other hand, the auditor may be helping the other auditors that work with this client in the future. Further, healthy personal interaction is an important aspect of a healthy business environment. If the auditor doesn’t record the “social” time, she will not suffer any immediate personal consequences and the team will stay on budget, but past a reasonable amount of time, the auditor may be compromising her integrity. The auditor may also hurt the other auditors that work with this client in the future by establishing unreasonable expectations. b. The auditor has the right to not have to work on her own time when she is at home. Future auditors that also work with this client have the same right to not have to work on their own time. c. It is not fair for the supervisor to ask the auditor to give up her personal time to do work that is not going to be recorded. On the other hand, it is not fair for one auditor to affect the performance evaluation of the entire team by making it go 19-10
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Chapter 19 - Professional Conduct, Independence, and Quality Control over budget. 2. Student answers will vary, depending on their individual viewpoint. 19-36 1. a. If the auditor signs off on the exception without examining the underlying documents, he will save his and the client’s time. The downside is that if the exception really is a problem, it will go undetected and could cause serious problems for the firm.
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