Auditing principles

Overview

Auditing is a skill learned over time and with each new experience. Exposure to case studies can be helpful because they show what happens in real life. Ethics refers to procedures that an organization uses in its code of conduct and policies and procedures. What types of things are unethical? There may be issues of privacy, funds from unidentified sources, married couples on the same board of directors—anything that may cause a person to behave in a way that does not put business interests first may be considered unethical. Use the AICPA standards as your guide. When you are getting to know potential clients, it is important to consider ethical issues to ensure that the information you audit does not compromise integrity.

Directions

Select two ethical scenarios from the document provided in the Supporting Materials section. Read carefully to determine the role ethics plays in an audit. Specifically, you must address the following rubric criteria:

Identify the primary issue for the first case using AICPA standards.

Explain how to resolve the issue in the first case.

1. Identify the primary issue for the second case using AICPA standards.

Explain how to resolve the issue in the second case.

https://us.aicpa.org/content/dam/aicpa/research/st…

Scenarios: Module One Assignment Ethical Scenarios
Choose two scenarios from this document to complete your work.

Module One Assignment Ethical Scenarios
Ethical Reasoning 1
Maria is a partner in a medium-sized CPA practice. She and her firm are bidding on a consulting
engagement with Western Construction Company. Before Maria and her firm can make the
proposal to Western Construction, Maria’s husband, Robert, comes home to share some good
news. Robert has just been offered his dream job as CFO of Western Construction. Maria is
happy for her husband, but now she must consider the ethics of bidding on the consulting
engagement. Upon searching the AICPA Code of Professional Conduct, Maria does not find a
specific rule or ethics interpretation that addresses this circumstance, so she applies the
conceptual framework.
Q: What should Maria do and what is the likely outcome?
Ethical Reasoning 2
Janice is an audit manager in a large public accounting firm with 35 offices on the East Coast.
Janice has been dating Keith, a CFO of a company that is not a client of Janice’s firm. Keith has a
significant investment portfolio of his own. After dating for four months, Janice and Keith decide
to get married. However, Janice tells Keith it is important for him to carefully review his
investment portfolio. The policy in Janice’s firm is that she cannot have a direct investment, of
any size, in any audit client of the firm. Further, she cannot have a material indirect investment
in the audit client.
Q: How should this be handled by Janice and Keith?
Ethical Reasoning 3
Dana Moore is a CPA in Georgia. Dana has a modestly sized tax practice, and she performs
several audits of local school districts as well as a few cities and counties. Dana is also on the
board of directors of several charities, where she interacts with some of the businesspeople in
the area. One day, a local technology entrepreneur in the area walks into her office and says, “I
have worked with you on the board of directors of a local charity, and I like the perspectives you
bring to the board. My company is growing and needs an audit. I know you do audits, and I am
wondering if you would give me a bid on doing my company’s audit.”
Q: If you were Dana, what would be your response and why?