1. 3 - 1 Copyright  2003 Pearson Education Canada Inc. CHAPTER 3 Professional Ethics

2. 3 - 2 Copyright  2003 Pearson Education Canada Inc. professional ethics personal morals =?

3. 3 - 3 Copyright  2003 Pearson Education Canada Inc. professional ethics personal morals =

4. 3 - 4 Copyright  2003 Pearson Education Canada Inc. function of ? professional ethics personal morals =

5. 3 - 5 Copyright  2003 Pearson Education Canada Inc. function of: - nature of the profession - collective morals - regulatory & legal constraints professional ethics personal morals =

6. 3 - 6 Copyright  2003 Pearson Education Canada Inc. function of: - nature of the profession - collective morals - regulatory & legal constraints function of: ? professional ethics personal morals =

7. 3 - 7 Copyright  2003 Pearson Education Canada Inc. function of: - nature of the profession - collective morals - regulatory & legal constraints function of: - religious faith - family’s values - morals of peers - experiences - personality: selfish/altruistic professional ethics personal morals =

8. 3 - 8 Copyright  2003 Pearson Education Canada Inc. personal professional ethics The profession hopes that individual The profession hopes that individual practitioners will absorb the profession’s ethics into their personal morals. ethics into their personal morals. morals

9. 3 - 9 Copyright  2003 Pearson Education Canada Inc. Basic ethics principles are universal, regardless of religious affiliation, culture, background, etc.

10. 3 - 10 Copyright  2003 Pearson Education Canada Inc. Basic ethics principles EXAMPLE: Our class finds itself on a desert island with no hope of escape. What societal rules do we need?

11. 3 - 11 Copyright  2003 Pearson Education Canada Inc. 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. 3 - 12 Copyright  2003 Pearson Education Canada Inc. Why do people obey rules?

13. 3 - 13 Copyright  2003 Pearson Education Canada Inc. Why do people obey rules? -personal integrity “I said I would obey the rules, and I will.”

14. 3 - 14 Copyright  2003 Pearson Education Canada Inc. 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 will all benefit.”

15. 3 - 15 Copyright  2003 Pearson Education Canada Inc. 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 will all benefit.” -fear of consequences “If I break the rules, I may be punished.”

16. 3 - 16 Copyright  2003 Pearson Education Canada Inc. Why do people fail to obey rules?

17. 3 - 17 Copyright  2003 Pearson Education Canada Inc. -lack of personal integrity Why do people fail to obey rules?

18. 3 - 18 Copyright  2003 Pearson Education Canada Inc. -lack of personal integrity -selfishness Why do people fail to obey rules?

19. 3 - 19 Copyright  2003 Pearson Education Canada Inc. -lack of personal integrity -selfishness -rationalization “everyone does it” “it’s not illegal” “I won’t get caught” Why do people fail to obey rules?

20. 3 - 20 Copyright  2003 Pearson Education Canada Inc. What do you do when confronted with an ethical dilemma?

21. 3 - 21 Copyright  2003 Pearson Education Canada Inc. What do you do when confronted with an ethical dilemma? - obtain relevant facts

22. 3 - 22 Copyright  2003 Pearson Education Canada Inc. What do you do when confronted with an ethical dilemma? - obtain relevant facts - identify ethical issues

23. 3 - 23 Copyright  2003 Pearson Education Canada Inc. What do you do when confronted with an ethics dilemma? - obtain relevant facts - identify ethical issues - determine stakeholders

24. 3 - 24 Copyright  2003 Pearson Education Canada Inc. What do you do when confronted with an ethics dilemma? - obtain relevant facts - identify ethical issues - determine stakeholders - identify alternatives

25. 3 - 25 Copyright  2003 Pearson Education Canada Inc. 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. 3 - 26 Copyright  2003 Pearson Education Canada Inc. 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. 3 - 27 Copyright  2003 Pearson Education Canada Inc. Rules of Professional Conduct principles ideal standards of ethical con- duct (unenforceable)

28. 3 - 28 Copyright  2003 Pearson Education Canada Inc. Rules of Professional Conduct principles rules of conduct enforceable minimum standards ideal standards of ethical con- duct (unenforceable)

29. 3 - 29 Copyright  2003 Pearson Education Canada Inc. Rules of Professional Conduct principles rules of conduct interpretations issued by provincial institutes (not technically enforceable) ideal standards of ethical con- duct (unenforceable) enforceable minimum standards

30. 3 - 30 Copyright  2003 Pearson Education Canada Inc. 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. 3 - 31 Copyright  2003 Pearson Education Canada Inc. Facets of Independence 1. Financial independence - not having a financial interest in the client

32. 3 - 32 Copyright  2003 Pearson Education Canada Inc. Facets of Independence 1. Financial independence 2. Independence of mental attitude - professional skepticism

33. 3 - 33 Copyright  2003 Pearson Education Canada Inc. 1. Financial independence 2. Independence of mental attitude 3. Investigative independence - fee is adequate, staffing is appropriate - access to all evidence Facets of Independence To obtain sufficient appropriate audit evidence To reach proper opinion

34. 3 - 34 Copyright  2003 Pearson Education Canada Inc. Facets of Independence 1. Financial independence 2. Independence of mental attitude 3. Investigative independence 4. Reporting independence Ensures report is acted on

35. 3 - 35 Copyright  2003 Pearson Education Canada Inc. 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. 3 - 36 Copyright  2003 Pearson Education Canada Inc. 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. 3 - 37 Copyright  2003 Pearson Education Canada Inc. 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) Confidential Client Information

38. 3 - 38 Copyright  2003 Pearson Education Canada Inc. 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 Confidential Client Information

39. 3 - 39 Copyright  2003 Pearson Education Canada Inc. 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 Confidential Client Information

40. 3 - 40 Copyright  2003 Pearson Education Canada Inc. Integrity and Due Care In the performance of any professional service, a member shall maintain integrity (reputation for honesty) and use due care (application of appropriate level of care and skill for comparable trained professional).

41. 3 - 41 Copyright  2003 Pearson Education Canada Inc. 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. 3 - 42 Copyright  2003 Pearson Education Canada Inc. Adherence to GAAS & GAAP - A member shall comply with the pro- fessional standards in the CICA Handbook.

43. 3 - 43 Copyright  2003 Pearson Education Canada Inc. - 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. Adherence to GAAS & GAAP

44. 3 - 44 Copyright  2003 Pearson Education Canada Inc. Advertising & Solicitation - Solicitation of another’s client is prohibited.

45. 3 - 45 Copyright  2003 Pearson Education Canada Inc. Advertising & Solicitation - Solicitation of another’s client is prohibited. - Advertising which is not in good taste is prohibited.

46. 3 - 46 Copyright  2003 Pearson Education Canada Inc. 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. 3 - 47 Copyright  2003 Pearson Education Canada Inc. Contingent Fees A member in public practice shall not charge a fee contingent on the outcome of an audit, review or compilation.

48. 3 - 48 Copyright  2003 Pearson Education Canada Inc. Contingent Fees For what types of engagements may contingent fees be permitted?

49. 3 - 49 Copyright  2003 Pearson Education Canada Inc. Contingent Fees business and consulting services For what types of engagements may contingent fees be permitted?

50. 3 - 50 Copyright  2003 Pearson Education Canada Inc. Communication with Predecessor Auditor Any circumstances which should prevent successor from accepting? A member shall communicate with the predecessor auditor prior to accepting an appointment.

51. 3 - 51 Copyright  2003 Pearson Education Canada Inc. If public accountants comply with all of the Rules of Conduct, are they assured that they have not violated any accounting ethics rules?

52. 3 - 52 Copyright  2003 Pearson Education Canada Inc. If public accountants comply with all of the Rules of Conduct, are they assured that they have not violated any accounting ethics rules? YES!

53. 3 - 53 Copyright  2003 Pearson Education Canada Inc. Who must comply with the Rules of Professional Conduct? all accountants? all public accountants?

54. 3 - 54 Copyright  2003 Pearson Education Canada Inc. Not all rules are applicable for members not in public practice. all members Who must comply with the Rules of Professional Conduct?

55. 3 - 55 Copyright  2003 Pearson Education Canada Inc. What happens if a member violates the Rules of Professional Conduct? ROPC

56. 3 - 56 Copyright  2003 Pearson Education Canada Inc. - someone may know of the violation and report it to the Institute VIOLATION! What happens if a member violates the Rules of Professional Conduct?

57. 3 - 57 Copyright  2003 Pearson Education Canada Inc. - someone may know of the violation and report it to the Institute - the Institute may investigate and may prescribe discipline; possible sanctions include required CPE, publication, fines, suspension, or expulsion What happens if a member violates the Rules of Professional Conduct?