Question

A- True or False: (20 pts.) se 1-The AICPA is the only organization that a CPA must answer to involving ethical conduct. 2-Professional Ethics extend beyond moral principles but not above the letter of the law. e 3-Under rule 203, Accounting Principles, the FASB and GASB have been designated as the promulgating bodies for accounting Principles 4-An auditor may not divulge confidential information concerning a client, even if Subpoenaed (citado) to do so in court. 5- Under Rule 101 -Independence, an auditor may not have any direct or indirect financial Interest in a client. 6- The AICPA Code of Professional Conduct consists of two sections: principles and rules. 7- Under common law, auditors may be held liable to clients for breach of contract but not for torts (agravios).

Answer 1

1.False

National Association of Accountants (NAA), the world's largest organization of management accountants, has also been actively involved in promoting ethical behavior among accountants in the private sector.Also The National Commission on Fraudulent Financial Reporting (Treadway Commission) has also recommended that students be exposed to ethical questions and that more emphasis be placed on the ethical dimension of financial reporting in the business and accounting curricula.

2.False

Ethical people go beyond the laws. Although ethical people always try to be law-abiding, there may be instances where their sense of ethics tells them it is best not to follow the law. These situations are rare and should be based on sound ethical reasons. For example, workplace treatment of others may not violate employer-employee laws but still be unethical, such as forms of cyber-bullying.

3.TRue

In Rule 203 of its Code of Professional Conduct, the American Institute of Certified PublicAccountants (AICPA) has formally designated the GASB, the FASAB, and the FASB as theauthoritative bodies to establish generally accepted accounting principles

4.True

Because of potential professional and monetary hazards, CPAs must be astute in their handling of client information. Although the general rule is to never reveal information without a client's consent, there are exceptions.

To mitigate problems with client information, CPAs need to understand the professional and legal issues involved and should know when it is prudent to consult legal counsel. Mere compliance with the AICPA professional standards is insufficient to ensure legal compliance. While courts have, for the most part, relied upon generally accepted auditing standards to establish a CPA's standard of care, they do not recognize such standards as law. At times, the courts have held CPAs to a higher standard. At other times they have deemed that failure to comply with professional standards is only evidence of negligence and does not, by itself, constitute negligence.

5.True

Auditor has to follow independence INtegrity and objectivity in order to deliver quality in service.

6.False

The four parts of the AICPA Code of Professional Conduct are principles, rules of conduct, interpretations of the rules of conduct and ethical rulings.

7.False

Auditors shall be liable in either of the cases.

8.True

However the auditor shall not be liable if he proves that he despite his regular audit procedures and being professional skeptical did not come accross any circumstances which made him suspect a fraud.

9.False

It does not refer to slighest care but Ordinary negligence is the failure to act as a reasonably prudent person. It is the failure to exercise such care as the great mass of mankind ordinarily exercises under the same or similar circumstances. Ordinary negligence is the want of exercise of ordinary care.

10.False

The materiality threshold is defined as a percentage of that base. The most commonly used base in auditing is net income (earnings / profits). Most commonly percentages are in the range of 5 – 10 percent (for example an amount <5% = immaterial, > 10% material and 5-10% requires judgment) not an exact number of 5%

Answer 2

 2-Professional Ethics extend beyond moral principles but not above the letter of the law. True