The subdivision of the AICPAs Professional Code of Conduct I chose to cover is Section 100 – Independence, Integrity, and Objectivity. The followers is my response to the four inquiries that make up this assignment.
Which subdivision of the codification have you chosen, and what is its general intent?
As stated, I have chosen Section 100 – Independence, Integrity, and Objectivity. One intent of this subdivision is to set up the guidelines which define a member ‘s independency when executing attest services. It does so by utilizing a risk-based attack to analysing independency. The model of this attack is outlined in Section 100-1, suitably named, “ Conceptual Model for AICPA Independence Standards ” . As defined in Sec. 100-1.04, “ The risk-based attack entails measuring the hazard that the member would non be independent or would be perceived by a sensible and informed 3rd party holding cognition of all relevant information as non being independent ” . I think it is of import to observe that an accountant acting attest services should non merely be independent in fact, but besides be independent in visual aspect.
Section 102 trades with Integrity and Objectivity. Integrity deals with guaranting that comptrollers do non knowingly misrepresent facts as it relates to the maps they are executing. This subdivision defines what constitutes misdemeanors of this regulation in Section 102-1. Among them are, doing materially false statements sing an entity ‘s fiscal statements, neglecting to rectify false statements that are materially deceptive, and subscribing a papers which contains materially false information.
Objectivity is similar to independence in that an accountant must be free from any possible struggles of involvement when executing an audit or attest service. Again, the comptroller must be able to execute the occupation assigned without holding the visual aspect of being compromised by a relationship to the client or some other entity non straight related to the service they have been hired to execute. In this instance, if the accountant believes objectiveness can be maintained, and the conflicting relationship is disclosed and consented to by the client or appropriate parties, the regulation does non explicitly forbid executing the service. This does non intend that the regulations for independency should non be applied. Those regulations as outlined in Section 100 would still use.
What do you see as the significance of this subdivision for comptrollers?
The significance of this subdivision is to set up regulations for guaranting that the comptroller is able to execute their occupation without undue influence by person or some entity that is affected by the consequences of the service being performed. These interested parties are normally referred to as the stakeholders. They can include the officers or board of managers of the company, any lien-holders of the company ( Bankss, investing groups, etc. ) , and current stockholders or possible investors of the company. Any of these stakeholders may seek to act upon the result of an audit or other attestation service, and it is of import that the accountant acting such service non hold any interest or involvement in the client that could be affected by the consequences of the work they are making.
It is besides of import the stakeholders are able to trust on the information being presented as true and accurate and they can swear the unity of the accountant executing the service. If there is a opportunity that the comptroller may modify the statements for some ground, so the whole procedure becomes questioned. There is an inexplicit trust in comptrollers executing their occupation in an ethical and professional mode.
Where make you see state of affairss in an accounting pattern that would do the contents of this subdivision peculiarly relevant? Offer illustrations of such state of affairss.
This subdivision applies to virtually any service an accountant might execute, but I think that it is particularly important in the country of independent scrutinizing. As antecedently mentioned, many stakeholders depend on the consequences of an external audit. For public companies, the value of their stock depends on whether or non the company has met net incomes outlooks. As such, there is a important sum of force per unit area on the direction squad of such companies to show the best fiscal image of the company as possible. With this comes an increased built-in hazard of materially misstated financials and it is incumbent upon the hearer to do certain that the fiscal statements are right. If the scrutinizing house or spouse working on the audit has a fiscal interest in the company, so there exists the possibility that misstatements are overlooked in order to show a better image of the company ‘s fiscal wellness than really exists. Having regulations in topographic point to guarantee hearer independency helps to extenuate this hazard.
Another country where this subdivision has specific relevancy is the country of revenue enhancement accounting. This can use to both public and private companies. A revenue enhancement preparer that has a fiscal involvement in a company may be more inclined to exaggerate gross or claim tax write-offs that do n’t be in order to cut down the revenue enhancement liability of the company. The regulations for objectiveness and independency aid to extenuate this hazard every bit good.
As the aim of the Final Project states, I will demo how this subdivision has relevancy to the comptroller ‘s duty to co-workers. No comptroller or CPA works in a vacuity, and there is ever a trust on the work of others to assist one perform whatever peculiar service is being done. I believe there is an ethical responsibility to work with and back up other comptrollers in transporting out the duties of the profession.
Offer a list of five beginnings that you intend to confer with in researching your pick. You may include resources on the AICPA website besides the subdivision of the codification you have chosen, but merely list the AICPA web site as one of your five beginnings.
Aristotle, Nicomachean Ethics, translated by Ostwald, Martin, MacMillan Publishing Company: New York, 1962
American Institute of CPA ‘s, Rules of Professional Conduct, available at hypertext transfer protocol: //www.aicpa.org/Research/Standards/CodeofConduct/Pages/sec100.aspx
Bunting, Robert L, “ Regenerating a Great Profession ” , Journal of Accountancy, January 2005 available at hypertext transfer protocol: //www.journalofaccountancy.com/Issues/2005/Jan/RenewingAGreatProfession
Duska, Ronald and Duska, Brenda, Accounting Ethics, Blackwell Publishing: Malden, MA, 2003
Louwers, Timothy, Ramsay, Robert, Sinason, David, Strawser, Jerry, Thibodeau, Jay, Auditing and Assurance Services, McGraw Hill-Irwin: New York, 2011
Love, Vincent J. , “ When Rules May Weaken Principles: Enhancing Independence, Integrity, and Objectivity ” , The CPA Journal, March 2010, pp. 63-68 available at
hypertext transfer protocol: //viewer.zmags.com/publication/d005a42e # /d005a42e/64
Sarbanes-Oxley Act of 2002 available at hypertext transfer protocol: //www.sec.gov/about/laws/soa2002.pdf
Other beginnings to be listed as needful