1. Modern Auditing: Assurance Services and the Integrity of Financial Reporting, 8 th Edition Modern Auditing: Assurance Services and the Integrity of Financial Reporting, 8 th Edition William C. Boynton California Polytechnic State University at San Luis Obispo Raymond N. Johnson Portland State University Chapter 3 – Professional Ethics

2. Chapter 3 Overview

3. Ethics and Morality General Ethics – Ethical Dilemma – Ethical Absolutists – Ethical Relativists Professional Ethics – Commitment by profession – Ethical Principles and Rules of Conduct

4. AICPA Professional Ethics Division Standard Setting Ethics Enforcement Technical Inquiry Services

5. Composition of The Code Two Sections – Principles – Rules of Conduct Pronouncements – Interpretations of the Rules of Conduct – Ethical Rulings

6. Ethical Principles Responsibilities The Public Interest Integrity Objectivity and Independence Due Care Scope and Nature of Services

7. Study Break 1.Which two of the following elements are member-adopted sections of the Code: A.Principles B.Ethical Rulings C.Interpretations D.Rules of Conduct A. Principles and D. Rules of Conduct

8. Study Break 2. Which ethical principle states that members should honor the public trust and demonstrate a commitment to professionalism? A.Integrity B.Public Interest C.Due Care D.Responsibilities B. Public Interest

9. Rule 101 - Independence

10. Engagement-Based Approach Covered Members Prohibited Activities Immediate Family Members Close Relatives Other Professionals and Their Immediate Family Members

11. Employment with an Attest Client Employee becomes employed by client – Public Companies – Private Companies Employee seeks employment with client

12. Other Independence Issues Nonattest Services Private Companies Litigation Unpaid Fees

13. AICPA Rules of Conduct

14. AICPA Rules of Conduct (cont.)

15. State Boards and PCAOB State Accountancy Statutes and Laws Audit Firms of Public Companies

16. Enforcement of the Rules Joint Ethics Enforcement Procedures (JEEP) Joint Trial Board Procedures – Admonishment – Suspension – Expulsion Automatic Disciplinary Provisions

17. Study Break 3. Which of the following is subject to enforcement under the Rules of Conduct? A.Independence in Fact B.Independence in Appearance

18. Study Break 4. Under the joint trial board procedures, which of the following is not a possible disciplinary action that could be taken: A.Admonishment B.Suspension for five years C.Expulsion D.Suspension for two years or less B. Suspension for five years