Exam 4: Professional Judgment and Ethics

Describe an ethical dilemma that an auditor or an accountant might face in his or her business career. Then illustrate how the auditor or accountant might use the five-step approach presented in Chapter 4 to resolve the dilemma. Be specific.

Which of the following situations would be an example of a self-interest threat that would prevent a PA from auditing the client?

What in auditing is the application of relevant knowledge and experience, within the context provided by auditing and accounting standards and Rules of Professional Conduct, in reaching decisions where a choice must be made between alternative possible courses of action.

Frank has discovered that his employer is part of a group of banks that is manipulating interest rates. He would like to stop this practice at his employer but is not sure how best to talk to his boss. He has heard of the GVV (Giving Voice to Values) approach and thinks he may be able to use it successfully because his company has recently implemented new initiatives to empower employees to speak of improvements to business practices. The first step of the GVV approach includes

Which one of the following situations is a violation of the professional rules of conduct? PA

The Rules of Professional Conduct require a successor auditor to communicate with the previous auditor. The primary concern in this communication is

Financial statement users cannot be expected to evaluate audit performance because they will not have the time or the competence to do so. In such a situation, how is public confidence in the quality of professional services enhanced? When there are

A familiarity threat at an audit engagement occurs when

Ethical behaviour is considered to be a cornerstone for trust in everyday life as well as in business practices. Ethics are

Why does a self-review threat pose a problem when conducting an audit engagement?

It is not practical for users to evaluate the quality of the performance of most professional services because of their

Frank has discovered that his employer is part of a group of banks that is manipulating interest rates. He would like to stop this practice at his employer but is not sure how best to talk to his boss. He has heard of the GVV (Giving Voice to Values) approach and thinks he may be able to use it successfully because his company has recently implemented new initiatives to empower employees to speak of improvements to business practices. After considering his personal and professional purpose and choices, what should Frank do next?

To ensure that employees remain independent, an audit firm should

How is use of an applicable accounting framework enforced via legislation?

In which of the following circumstances would a public accountant be bound by ethics to refrain from disclosing any confidential information obtained during the course of a professional engagement?

In a code of conduct, the advantage of general statements of ideal conduct (as opposed to specific rules of behaviour) is

Which one of the following forms of advertisement would violate solicitation rules? PA

You are the senior in charge of the accounts receivable section of the audit of a large clothing manufacturer downtown in the clothing district. The client sells to local clothing stores as well as to other retailers in the province. Accounts receivables seem to be deteriorating, with many more accounts in the over 90 days column than in the past. You sent out twenty accounts receivable confirmations, but only six were returned. Of these six, only three confirmed the balance as in agreement with the client, while the others indicated that they kept their records on an open item basis (rather than a balance forward basis) and were unable to respond to the confirmation request. When you looked at the prior year's file, it seemed that the same thing had happened last year. When you phoned the supervisor in charge of the audit engagement, she told you to not bother with follow up, as the engagement was already over budget and costs need to be kept down. You were concerned that you would be unable to state a conclusion with respect to the fairness of the accounts receivable balance and she was really angry with you, saying that she would have to sign off for you then. Required: Discuss the ethical and quality issues raised by this audit engagement.

For listed clients, the audit committee should approve both the appointment of the auditor and

When public accountants are able to maintain an independent attitude in fulfilling their responsibility, it is referred to as independence in