Accounting Ethics Dilemmas

Accounting Ethics Dilemmas

A problem in terms of conflict of interest and a lack of objectivity could arise in this case. While there is no particular problem in performing the audit itself, the CPA could be tempted to hire only persons from his or her own firm, or acquaintances, rather than objectively engaging in the recruitment and hiring process. The problem could be resolved by honestly discussing the issue and possible problems with the client. The CPA and the client together can then discuss the best course of action, and possibly engage in the recruitment and hiring process together. This will ensure not only objectivity on the part of the CPA, but also that the client is happy with the result. This relates to Rule 102-2.03 of the AICPA Code of Ethics, which concerns conflicts of interest and objectivity. The rule states that client consent needs to be obtained in performing a duty that might involve a lack of the necessary objectivity.

NO. 2 There are certain steps to follow as specified in Section 191.52.103 of the AICPA Code of Ethics, as concerns unpaid fees. Unqualified statements can only be provided once a year has expired more than a year prior to the new report. The CPA is therefore within his or her rights to issue the opinion, as the audit has further been conducted within the auditing standards.

NO. 3 Since the CPA is only starting a new practice, he or she cannot make any claims to be either a "specialist" or an "expert" in anything. However, the necessity for attractive advertising is recognized. Rather than making claims that are untrue, therefore, it is recommended that the advertiser takes a more general approach, such as stating his or her "experience" for a number of years. This relates to Rule 502.03 of the AICPA Code of Ethics, which concerns "false, misleading or deceptive acts in advertising or solicitation. The Rule states that placing deceptive advertisements is not in the public interest, and is therefore prohibited.

NO. 4 in this case again there is a conflict of interest. The temptation could be to provide very favorable evaluations for the commercial service bureau in which the firm's partners have a material interest. Once again, in accordance with Rule 102-2.03 of the AICPA Code of Ethics, it is recommended that the CPA honestly discuss the issue with the client. The client could then for example retain the CPA in this regard, but in concomitance with other professionals in order to ensure the necessary objectivity.

NO. 5 According to Section 92.06, Rule 101-4 of the AICPA Code of Ethics, a CPA is within his or her rights to provide services or lend his or her name to not-for-profit organizations without compromising his or her independence. It is therefore not incorrect to include this in a CV, as long as the exact nature of the service and organization is stipulated.

NO 6. Identifying only himself as CPA could be misleading to persons making use of the firm, and also create a conflict of interest for the professional staff that remains. This could further lead to resentment and eventually to resignations. To eliminate this problem, John Smith could firstly discuss the issue with the professionals involved and request ideas for the firm's new title. He could also use the previous title as a guideline, as this would provide both a starting point for the new era, as well as the idea that the previous owner and the staff that remains are honored for their contributions to date. According to Rule 505-3 of the AICPA Code of Ethics, it appears that the exact title of the firm is not as important as maintaining practices that are within the public interest. It is both in the firm's and the public interest to remain as close as possible to the previous name, while at the same time indicating that it is now under new management.

NO. 7 the CPA can avoid possible disciplinary action for treating the product recall as an extraordinary item by communicating both with his or her employers and professional entities. If it is determined that such a step is necessary, then the standards have been adhered to and no problems should result, as indicated by ET Section 91.02.1.

NO. 8 There is no reason why the CPA should not familiarize him- or herself with the government audit requirements. Indeed, such additional research is often a requirement of accounting work, regardless of whether or not the normal auditing standards have been followed. This is indicated by Rule 201-1 in Section 201.02 of the AICPA Code of Ethics, which concerns "Competence."

NO. 9 the CPA appears to be searching for excuses to engage in unethical accounting conduct. Doing this could result in legal problems for both the professional and the MDs for whom services are provided. Rule 502-5 under Section.06 of the AICPA Code of Ethics expressly prohibits such use of third parties to disregard the accepted Code of Ethics.