Ethics and Professional Conduct for CPAs Flashcards

Flashcards covering ethics and professional conduct for CPAs.

What is the primary function of ethics?

To develop formulas or logical constructs that can be used in choosing between various courses of action.

According to John Austin, what are the two types of laws?

Natural Laws and Positive Laws

According to John Austin, what is the AICPA's Code of Professional Conduct classified as?

A 'positive law.'

What are the dual purposes of professional ethical codes?

To protect consumers and promote particular professions.

What happens when CPAs are willing to sign false returns?

The less value there is in having the return signed.

What is the most important reason for CPAs to follow professional ethics?

To behave in the most ethical manner.

What is The Code of Professional Conduct?

Provides guidelines for accounting practitioners in the conduct of their professional affairs.

What are the six principles of the Code of Professional Conduct?

Responsibilities, The Public Interest, Integrity, Objectivity and Independence, Due Care, Scope and Nature of Services

Why does this ethics course examine the AICPA Code of Professional Conduct when membership in the AICPA is voluntary?

Most state boards of accountancy pattern their laws and regulations after the AICPA Code or refer to it

A potential audit client is owned by the CPA’s stepbrother. Would the CPA be independent with regard to the potential client?

A stepbrother is not considered a close relative under the independence rules and normally would not impair independence.

What is the purpose of Rule 102?

In the performance of any professional service, a member shall maintain objectivity and integrity, shall be free of conflicts of interest, and shall not knowingly misrepresent facts or subordinate his or her judgment to others.

What is the AICPA’s Rule 201?

A member shall comply with the following standards and with any interpretations thereof by bodies designated by Council. A. Professional Competence. Undertake only those professional services that the member or the member’s firm can reasonably expect to be completed with professional competence. B. Due Professional Care. Exercise due professional care in the performance of professional services. C. Planning and Supervision. Adequately plan and supervise the performance of professional services. D. Sufficient Relevant Data. Obtain sufficient relevant data to afford a reasonable basis for conclusions or recommendations in relation to any professional services performed.

Why is Rule 301 important?

To encourage a free flow of information from the client to the CPA; however, the rule makes it clear that the principle of confidentiality is not absolute.

A CPA cannot release confidential client information without the specific consent. What must the CPA receive?

A validly issued and enforceable subpoena or summons

What should you do to avoid subordinating judgment?

Steffen should first determine whether the inventory writedown is material. If so, she should restate her concerns to the CFO and CEO and, if the latter persists in not supporting the writedown, Steffen should bring the matter to the attention of the audit committee of the board of directors. She should document the understanding of the facts, the accounting principles involved, the application of the principles to the facts, and the parties with whom discussions were held.

What is Rule 501 about?

A member shall not commit an act discreditable to the profession.

What is prohibited regarding communications?

False, misleading, or deceptive

What is Rule 505 about?

Form of Organization and Name

What is circular 230?

Prescribes regulations governing the practice of attorneys, CPAs, EAs, Enrolled Actuaries, appraisers, and others before the Internal Revenue Service.

What role do tax advisors play in the federal tax system?

An increasingly important role

Section 10.21

Knowledge of client’s omission

Section 10.22

Diligence as to accuracy