Acts Discreditable
What does 'Acts Discreditable' mean under the AICPA code?
Misconduct that harms the reputation of the profession.
What does the Confidential Client Information Rule prohibit?
Disclosing client information without consent.
What are the two types of independence in the AICPA Code?
Independence of Mind and Independence in Appearance.
True/False – Going to a baseball game with the client and the audit team is always fine.
False – it may create independence concerns.
A 'negative code' is primarily written as ______.
Prohibitions ('Don’t do…').
Give one example of an act discreditable.
Examples: sexual harassment, hostile work environment, discrimination, criminal conviction, failure to file taxes.
Name one situation where disclosure is permitted under the AICPA Code.
Examples: subpoena/court order, peer review, ethics investigation.
How many key threats to independence are outlined by the AICPA?
Seven threats.
Which threat arises if an auditor accepts expensive event tickets from a client?
Self-interest and Undue Influence threats.
A 'positive code' is primarily written as ______.
Aspirational principles (e.g., Be honest, fair).
True/False – Acts discreditable only apply to professional work, not personal behavior.
False – they apply to both professional and personal misconduct.
True/False – You can tell your spouse about a client’s upcoming IPO.
False – that violates confidentiality.
Which threat occurs if a CPA audits financials they helped prepare?
Self-review threat.
Can a partner have dinner with the client’s CEO and their spouses during the audit?
Risky – could impair independence if it suggests closeness.
True/False – The AICPA Code is mostly positive.
False – it is largely prohibitive/negative.
Which body or bodies typically disciplines CPAs for acts discreditable?
State Boards of Accountancy or AICPA
If you lose your laptop with encrypted client data, what else should you consider disclosing?
You need to notify client, even if no other files were included with the encrypted laptop
Which threat occurs if an auditor’s spouse works as CFO of a client?
Familiarity threat.
What Code section covers gifts and entertainment?
ET §1.285.010.
Which organization’s code is often used as an example of a positive, principles-based code?
IMA (Institute of Management Accountants).
What can happen if a CPA is convicted or even charged with a crime like fraud or harassment?
They may lose their license or face suspension.
What section of the AICPA Code governs Confidential Client Information?
ET §1.700.
Which AICPA Code section governs independence rules?
ET §1.200.
Which safeguard could reduce the threat of independence impairment from client dinners?
Policies limiting gifts/entertainment; disclosure to audit committee.
Why might a positive code be more effective than a negative one?
It fosters culture and values, guiding behavior in gray areas.