Acc/325 Phase 2

Sarah GunsetACCT 325
Phase 2 IP-2Jason Cade
July 21, 14
Ethics plays such an important role in the business world. There are organizations and boards that set guidelines specifically to improve the work environment and help control the amount of ethical dilemmas. The SEC works as the head quarters for these boards and has developed many new guidelines since the crisis of the early 2000’s. The International Ethics Standards Board for Accountants (IESBA) has established ethical standards and guidelines for accountants similar to those of the AICPA’s Rules of Conduct. There are many organizations that are working in unison to create the best atmosphere for the business world and those involved.
Auditors are already in a risky field
due to the companies and investors that depend so heavily on their work. The opinions of auditors are held at such high standards yet criticized immensely by every opposing party. These encounters are inevitable making it so important that auditors follow every guideline, ethical and standard. The IESBA has created specific guides for accountants leaving less room for error. This Code of Ethics consists of 5 principles:
Integrity
Objectivity
Professional Competence and Due Care
Confidentiality
Professional Behavior
An auditor must always be honest and posses respectful moral qualities.
Having integrity, an auditor will always give a sincere fair audit that is truthful and reliable to the company and its investors. Without the integrity of an auditor, there would be no foundation or value to the opinion. Auditors must also stay clear of illegal business and independent of clients.
Auditors should remain objective at all times. The audit should always be fair and neutral. No bias opinions should ever be formed and an auditor should refrain from a project if they are not able to be independent.
It is the Auditors job to stay up-to-date in their profession. Auditors should act professional and meticulous. They should knowledge, skill, and be proficient in their field of work. All standards must be strictly followed.
Without the security of confidence, auditors would become the enemy. It is highly ethical that auditors never share information or records to anyone that does not have the legal right of disclosure. Private information should never be used for the personal advantage of the
auditor.
Professional behavior is definitely important to the auditing and accounting profession. There is a high amount of distrust for auditors and accountants and staying professional and ethical can eliminate and prevent negative connotations.
The AICPA (American Institute of Certified Public Accountants) is a voluntary national organization. Having more than 370,000 members, the AICPA focuses its concerns mostly on students in auditing. The organization has four main areas: Establishing standards and guidelines to CPAs, Research and Publication, continuing professional education, and contributing to the self-regulation of the accounting profession. The AICPA has a “Rules of Conduct” that is a list of guidelines for all CPAs to follow. They are very specific and easily attainable. Listed are a few of the important highlights of the rules:
Independence
Integrity and Objectivity
Confidentiality
Contingent Fees
Independence is definitely one of the most important rules in auditing.
If the auditor does not stay completely independent, financially, personally, and to a point, professionally, the audit will lose its value. Though the rule seems clear and mess free, there are exceptions. Auditors may have small loans with a client as long as they are on standard terms. An auditor may also do work for an auditor as long as they are not conflicting with the work that they audit. For example, auditors may install system software but it is a good idea not to do the taxes of a client.
Integrity and objectivity is a rule that pertains to both practicing and non-practicing CPAs. Becoming a CPA comes with many responsibilities and expectations. CPAs should never conduct misleading statements rather they are the CFO or auditor.
Auditors are to keep all information they obtain during the audit confidential. Audits would not work properly without the client’s assurance of confidentiality. This being said, there are a few legal exceptions that grant individuals or organizations the right to some
information.
Contingency fees are fees that the auditor charges a company for an outside service. For example, an auditor that installs POS may charge 30% of whatever the system saves the company over a stated period of time. These fees are prohibited from any client that the auditor performs an attestation service for to prevent any unethical incidents.
Both the AICPA and IESBA are similar in more ways than not, however, there are a few minor differences. The IESBA addresses their code as principles and the AICPA addresses their code as rules for active and non-active CPAs. Accountants are required to follow the principles of IESBA code. Accountants are not only to comply with the principles, but also apply a “Conceptual Framework Approach” to evaluate ethical conduct whenever they know that their compliance is in jeopardy whereas the AICPA only requires this approach when the rules do not specifically apply to the situation. The IESBA goes more into detail about independence than the AICPA but the AICPA’s rules are more restrictive.
Independence is obviously one of the main goals that an auditor strives for. With independence, much other auditing ethicality will fall into place. Independence in appearance requires the auditor to remain visibly independent avoiding the reasonable involvement of a third party to assume that the code has been compromised. Independence in appearance is just how it sounds. It is important that you appear to be independent giving no reason for someone to assume otherwise. Independence of fact, or real independence, is your mental positioning with a client. How would you react during a conflicting scenario? Auditors must not have a bias to their client and must remain completely mentally independent.
References
Rittenberg., Johnstone., & Gramling. (2012). Auditing: A Business Risk Approach (8e ed.). South-Western.
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