CHAPTER 3 Professional Ethics

1. CHAPTER 3Professional Ethics

2. personal morals professional ethics = ?

3. = personal morals professional ethics

4. = personal morals professional ethics function of ?

5. = personal morals professional ethics function of: - nature of the profession - collective morals - regulatory & legal constraints

6. = personal morals professional ethics function of: ? function of: - nature of the profession - collective morals - regulatory & legal constraints

7. = personal morals professional ethics function of: - religious faith - family’s values - morals of peers - experiences - personality: selfish/altruistic function of: - nature of the profession - collective morals - regulatory & legal constraints

8. The profession hopes that individual practitioners will absorb the profession’s ethics into their personal morals. personal morals professional ethics

9. Basic ethics principles are universal, regardless of religious affiliation, culture, background, etc.

10. Basic ethics principles EXAMPLE: Our class finds itself on a desert island with no hope of escape. What societal rules do we need?

11. Basic ethics principles - be honest - have integrity - keep your promises - be faithful and loyal - be fair - care for others - respect others - be a responsible citizen - pursue excellence - be accountable

12. Why do people obey rules?

13. Why do people obey rules? - personal integrity “I said I would obey the rules,and I will.”

14. Why do people obey rules? - personal integrity“I said I would obey the rules, And I will.” - utilitarianism “If we all obey the rules, we willall benefit.”

15. Why do people obey rules? - personal integrity“I said I would obey the rules, and I will.” - utilitarianism “If we all obey the rules, we willall benefit.” - fear of consequences“If I break the rules, I may be punished.”

16. Why do people fail to obey rules?

17. Why do people fail to obey rules? - lack of personal integrity

18. Why do people fail to obey rules? - lack of personal integrity - selfishness

19. Why do people fail to obey rules? - lack of personal integrity - selfishness - rationalization “everyone does it” “it’s not illegal” “I won’t get caught”

20. What do you do when confronted with an ethical dilemma?

21. What do you do when confronted with an ethical dilemma? - obtain relevant facts

22. What do you do when confronted with an ethical dilemma? - obtain relevant facts - identify ethical issues

23. What do you do when confronted with an ethics dilemma? - obtain relevant facts - identify ethical issues - determine stakeholders

24. What do you do when confronted with an ethics dilemma? - obtain relevant facts - identify ethical issues - determine stakeholders - identify alternatives

25. What do you do when confronted with an ethics dilemma? - obtain relevant facts - identify ethical issues - determine stakeholders - identify alternatives - identify consequences of alternatives on stakeholders

26. What do you do when confronted with an ethics dilemma? - obtain relevant facts - identify ethical issues - determine stakeholders - identify alternatives - identify consequences of alternatives on stakeholders - decide

27. principles Rules of Professional Conduct ideal standards of ethical con- duct (unenforceable)

28. principles rules of conduct Rules of Professional Conduct ideal standards of ethical con- duct (unenforceable) enforceable minimum standards

29. principles rules of conduct interpretations Rules of Professional Conduct ideal standards of ethical con- duct (unenforceable) enforceable minimum standards issued by provincial institutes (not technically enforceable)

30. Rules of Professional Conduct Independence A member in public accounting must be independent in the performance of certain professional services (audits, reviews, other attestation functions; not tax returns, compilations, manage- ment consulting).

31. Facets of Independence 1. Financial independence - not having a financial interest in the client

32. Facets of Independence 1. Financial independence 2. Independence of mental attitude - professional skepticism

33. Facets of Independence 1. Financial independence 2. Independence of mental attitude 3. Investigative independence - fee is adequate, staffing is appropriate - access to all evidence To obtain sufficient appropriate audit evidence To reach proper opinion To reach proper opinion

34. Facets of Independence 1. Financial independence 2. Independence of mental attitude 3. Investigative independence 4. Reporting independence Ensures report is acted on

35. Confidential Client Information A member in public practice shall not disclose any confidential client (or employer) information without the specific consent of the client (or employer). Confidential / inside infor- mation can’t be used to benefit the member.

36. Confidential Client Information A member in public practice shall not disclose any confidential client informa- tion without the specific consent of the client. What are the exceptions?

37. Confidential Client Information A member in public practice shall not disclose any confidential client informa- tion without the specific consent of the client... What are the exceptions? - subpoena or summons (court)

38. Confidential Client Information A member in public practice shall not disclose any confidential client informa- tion without the specific consent of the client... What are the exceptions? - subpoena or summons (court) - disciplinary proceedings

39. Confidential Client Information A member in public practice shall not disclose any confidential client informa- tion without the specific consent of the client... What are the exceptions? - subpoena or summons (court) - disciplinary hearings - practice inspections

40. Integrity and Due Care In the performance of any professional service, a member shall maintain integrity (reputation for honesty) and use duecare (application of appropriate level of care and skill for comparable trained professional).

41. Competence A member shall maintain his / her professional competence. Undertake only those professional services that the member or the member’s firm can rea- sonably expect to be completed with professional competence.

42. Adherence to GAAS & GAAP - A member shall comply with the pro- fessional standards in the CICA Handbook.

43. Adherence to GAAS & GAAP - A member shall comply with the pro- fessional standards in the CICA Handbook. - A member shall not be associated with false or misleading financial infor- mation.

44. Advertising & Solicitation - Solicitation of another’s client is prohibited.

45. Advertising & Solicitation - Solicitation of another’s client is prohibited. - Advertising which is not in good taste is prohibited.

46. Breaches of Rules of Professional Conduct A member who is aware of a breach by another member must report the breach to the disciplinary committee after advising the member of the intent to make a report.

47. Contingent Fees A member in public practice shall not charge a fee contingent on the outcome of an audit, review or compilation.

48. For what types of engagements may contingent fees be permitted? Contingent Fees

49. For what types of engagements may contingent fees be permitted? Contingent Fees business and consulting services

50. Communication with Predecessor Auditor A member shall communicate with the predecessor auditor prior to accepting an appointment. Any circumstances which should prevent successor from accepting?