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Importance of ethical decision making in business
Importance of ethical decision making in business
Ethical challenges facing accountants
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Case 1-4 1. The principles of the AICPA Code of Conduct should guide the work that Jose and Emily do as auditors. The principles that specifically apply to this situation are Responsibilities, The Public Interest, and Due Care. CPAs have the responsibility to “exercise sensitive professional and moral judgments in all activities.” (Mintz, p. 19) The AICPA defines the public interest as “clients, credit grantors, governments, employers, investigators, the business and financial community, and others who rely on the objectivity and integrity of CPAs to maintain the orderly function of commerce.” (Mintz, p. 19) Taxpayer dollars fund the Lone Star School District. Therefore, the auditors have a duty to protect the public interest in this …show more content…
Jose and Emily should be following standards and ensure that exceptions are not being made due to the pressure from the school district manager. 2. Josephson’s Six Pillars of Character can provide insights into the statements and behavior of the manager. Those statements and behavior indicate that there are problems with his Trustworthiness, Respect, Responsibility, and Citizenship. In order to be trustworthy, the manager needs to provide transparent information. It is standard practice in business to provide receipts for any kind of reimbursement you are asking for. The honesty of the manager is being called into question since he cannot provide this basic information. He is also being unreliable as the district cannot count on him to follow the rules. The managers demeanor is defensive and rude and does not show respect to the auditors who are merely trying to exercise due care in the performance of their …show more content…
The ethical and professional issues of concern to Beverly Wald are: • The accounting system misallocated motors from the asset manufacturing equipment to inventory. There are issues of honesty, responsibility, and professional ethics. • Markowitz ordered motors against direct orders. He showed a lack of respect towards his supervisor, issues with loyalty and honesty. • Although the plant accountant knew it was wrong to charge motors to operating expenditures, the accountant bowed to the pressure to do it anyway. The accountant violated the AICPA code of conduct, especially regarding serving the public interest. There were also issues with honesty and integrity. • Milton issued such a restrictive standard that the business needs of the company were not being met. The machines were breaking down and customers experienced delays in receiving their product. The adherence to a strict rule blinded the company to ongoing operational needs. 2. The courses of action available to Wald, Plotkin, and Sugofsky to present at their meeting with Milton are: a. Approve the audit without making the changes to move the motors out of inventory and into assets. This does not protect the public interest and would violate professional standards. Milton Manufacturing would qualify for the
In addition, by deciding not to inform the limited partners of Ed’s deceit, Andrea would be disregarding the American Institute of Certified Public Accountants Code of Professional Conduct in her being unreliable, dishonest and deceitful. Andrea has the responsibility of protecting her client, which involves encouraging the correction of financial statements in order to prevent suspicion during audits that could lead to fines and imprisonment.
Which rule in the AICPA Code of Conduct is most related to Article 1.5 of the California Accountancy Act? Explain your conclusion.
However, circumstances changed “in cases in which an auditor fails to establish that applicable auditing standards were followed” (Zack 2011). Since WoolEx Mills’ auditors failed to properly identify the fraud risks that caused the material misstatements, they would be in breach of professional duty to shareholders. Litigation would mostly be pursued by WoolEx Mills’ shareholders, WoolEx Mills, third parties impacted by the auditors services, creditors, and other parties who rely on WoolEx Mills financial statements. Each plaintiff would have the right to sue the auditors for their negligence in performing the audit with due diligence. To prove a breach of contract, WoolEx Mills would need to provide the engagement letter as proof that the auditors did not peform the duties agreed upon. Additionally, WoolEx Mills’ auditors would be charged with either gross or ordinary negligence based on their deviation from proper auditing standards. Since the auditors failed to test the company’s internal controls, they would be found guilty of gross negligence. The auditors would be guilty of ordinary negligence if they forgot to complete a section of the vertical analysis of the Income Statement (Zack 2011) (Krishnan & Shah
...hey would implement it. This type of feedback can help to shape a policy. It is imperative that school administrators know their district’s policies because in a court of law, the question that will be asked is whether or not the school/district followed their own policies/rules.
Clients want accountants with integrity. Thus, integrity is critical to the public trust. As a matter of fact, one of the general definitions of integrity provided by the AICPA Code is that it is a quality from which the public trust derives. Also, it is an element of character fundamental to professional recognition, and it requires members to be (among other things) honest and candid within the constraints of confidentiality (Duska, Duska & Ragatz, 2011).
The oversight responsibilities of the board, the CAE lacking of expertise or broad understanding of financial controls and responsibilities, and the understaffed internal audit functions lacking of independence and direct access to the board of directors contributed to the absence of internal controls. To begin with, the board should be retrained to achieve financial literacy to review financial reporting. Other than attending formal meetings, the board of directors should be more involved with the management. For the Audit Committee, the two members who were recruited as acquaintances to Brennahan need be replaced with experts who are more sufficiently knowledgeable about accounting rules beyond merely “financially literate”. Furthermore, the internal audit functions need to expand with different expertise commensurate with the expanded activities of the organization, testing financial reporting rather than internal controls from an operational perspective. The CAE should be more independent and proactive to execute audit plans, instead of following orders from the CFO, and initiate a direct and efficient communication between internal audit and audit
McMillan, M. (2012, February 17). Codes of Ethics: If You Adopt One, Will They Behave? Retrieved November 06, 2016, from https://blogs.cfainstitute.org/investor/2012/02/20/codes-of-ethics-if-you-adopt-one-will-they-behave/
In order to become a Certified Public Accounting (CPA) one must take and pass the CPA exam issued by the American Institute of Certified Public Accountants (AICPA). In order to receive licensing, one must follow the guidelines of their respective state in order to obtain a license from that state’s Board of Accountancy to get into practice. With any practice there are rules and guidelines that a person must follow. The Code for CPAs is in place in order to ensure that licensees practice accounting without any problems or discrepancies. As we all know, with any law, rule, or guideline there are loopholes and people that try to work their way around the rules or blatantly not follow them. In the state of South Carolina, there are many people and firms that violate the Code. When the Code is violated, the state board will hold a hearing and decide on the matter and issue a penalty. The following explains a few of these violations made in the year 2008 and the penalties issued by the South Carolina State Board, along with an opinion on the decisions made.
Public Funds and Property. This standard refers to educators the management of public funds (collecting and receipting/depositing with accuracy). Unethical behavior includes the misuse of school funds, failure to account for the total amount collected, fraudulent requests for reimbursement of expenses incurred, co-mingling school/personal funds and the use of school property for personal
The PCAOB has the authorization to provide rules governing the following areas; ethics, independence, and quality control for any registered accounting firm...
The aim of this paper is to provide the framework of the current professional accounting code of ethics. What are the ethics and how we define them? In this report we try to determine the main ethical principles that will establish the right and
Audit is a process to evaluate and review the accounts and financial statement objectively. We can divide it into internal auditors and external auditors. Internal auditors have a inner knowledge of business process. Auditor has access to the much confidential information and all levels of management. But they may lose their judgement and they are not acceptable by the shareholder. “The overall objective of the external auditors is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to report on the financial statements in acco...
to enforce the standards, without the standards the discipline is out the window and useless.
4) . One of the largest bankruptcies in history was enabled by accountants hiding debt and destroying the evidence to avoid implication (Buckstein, part 2 pgs. 1, 2, and 3). These unfortunate events led to the need for increased scrutiny and regulations, including the Sarbanes-Oxley Act (Buckstein, part 3 pg 1). This legislation inspired the creation of the Canadian Public Accountability Board (CPAB) (Buckstein, part 3 pg 1). These changes have led to an increased awareness of the need for auditor independence as well as higher standards for accounting and business in general (Buckstein, part 3 pg 1). While these measures have helped to reassure the public, there is still the question of why Accountancy is not a protected
Exercise of “reasonable skill, care and caution” varies according to situations (Lopes, J. in Kingston Cotton Mill Co 1896). Nevertheless, to achieve such in performing an audit, its an auditors responsibility to comply with the requirements cited in ISA (NZ) 200, as follows (1) Ethical requirements