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Group Number 8

Group Number 8. Jennifer Chan Michael English Jesse Lee Nick Rosas Chelsea Underhill. Evaluating an Ethical Dilemma: Ethics and Auditor Responsibilities. Case 7.

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Group Number 8

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  1. Group Number 8 Jennifer Chan Michael English Jesse Lee Nick Rosas Chelsea Underhill

  2. Evaluating an Ethical Dilemma: Ethics and Auditor Responsibilities Case 7 A key factor that an auditor provides is independence. The AICPA Code of Professional Conduct states that “a member in public should be independent in fact and appearance when providing auditing and other attestation services.”

  3. The AICPA Code of Professional Conduct “The American Institute of Certified Public Accountants is the national, professional organization for all Certified Public Accountants. Its mission is to provide members with the resources, information, and leadership that enable them to provide valuable services in the highest professional manner to benefit the public as well as employers and clients. In fulfilling its mission, the AICPA works with state CPA organizations and gives priority to those areas where public reliance on CPA skills is most significant.” - http://www.aicpa.org/About+the+AICPA/AICPA+Mission/

  4. 1. Jack Jones is a partner with a large audit firm and is assigned to the Ford audit. Jack owns 10 shares of the Ford. As an auditor, Jack is responsible for examining the financial reports to ensure that Ford represent what they claim and confirm generally accepted accounting principles. Even though he owns shares from the company, he is still compromising his independence with the company. He can lie or change the financial reports, therefore earning more than what he should be getting.

  5. 2. Jane Winkler has invested in a mutual fund company that owns 500,000 shares of Sears stocks. She is the auditor of Sears. As an auditor Jane examines the financial reports of Sears to ensure that they represent what Sears claim and conform with the GAAP. (Generally Accepted Accounting Principles) By investing in a mutual fund that has a large chunk of Sears stock Jane is compromising her independence with the company. When checking Sears’s financial records she could possibly alter or lie about her findings in her report so she can indirectly earn more money through her mutual fund.

  6. 3. Bob Franklin is a clerk/typist who works on the audit of AT&T. He has just inherited 50,000 shares of AT&T stock. (Bob enjoys his work and plans to continue despite his new wealth.) There is a lack of independence due to the fact that Bob inherited a large share of stock from AT&T. He can no longer audit for the company because he is compromising his independence with the company. He could alter the financial records which would increase his earnings, more than his share.

  7. 4. Nancy Sodoma worked on weekends as the controller for a small business that a friend started. Nancy quit the job in midyear and now has no association with the company. She works full-time for a large CPA firm and has been assigned to do the audit of her friend’s business.

  8. Nancy…the CPA • Nancy's relationship with the company's entrepreneur suggests lack of independence.  On one level, Nancy's integrity could be compromised as a favor to a friend.  As big boss, Nancy's friend would have much incentive, and conceivably ample means to coax favorable audit results from Nancy.  Furthermore, her former employment for this company brings her ties to it even closer.  Her position as controller could very well have produced friendship with other accountants or bookkeepers at her friend's business.  The fact that her position at this business was finance-related would severely diminish any credibility she would aspire for now as this company's hired "independent" auditor.  Both Nancy's personal and professional ties to this company should disqualify her eligibility as an auditor for this company.

  9. 5. Mark Jacobs borrowed $100,000 for a home mortgage from First City National Bank. The mortgage was granted on normal credit terms. Mark is the partner in charge of the First City Audit. Mark Jacobs is compromising his independence with First City National Bank because he has a liability with the mortgage company. He owes them 100,000 dollars and it would be unethical for him to conduct an audit on a company that he does personal business with.

  10. PowerPoint presented by: GROUP 8 Michael English Jennifer Chan Jesse Lee Chelsea Underhill Nick Rosas

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