Accounting Principles And Standards Of Professional Conduct

1. Observers of the accounting profession suggest that many courts attempt to ¡§socialize¡¨ investment losses by extending auditors¡¦ liability to third-party financial statement users. Discuss the benefits and costs of such a policy to public accounting firms, audit clients, and third-party financial statement users, such as investors and creditors. In your view, should the courts have the authority to socialize investment losses? If not, who should determine how investment losses are distributed in our society?

2 Managing fraud risk: The audit committee perspective Fraud in a fi nancial statement audit

“ In order to prevent fraudulent financial reports and statements, the American Institute of Certified Public Accountants(AICPA) has created ethical standards” (Ethical standards in a financial statement, 2011). These standards aim to make financial professionals accountable for their accounting practices. This includes the integrity of financial reporting and ensuring financial reporting is done fairly and factually. Financial accountants and professionals should maintain professional integrity, objectivity, and independence to reduce the risk of resulting legal action, loss of profits, and a poor reputation if improper financial reporting is done (Ethical standards in a financial statement, 2011).

The AICPA published the generally accepted auditing standards (GAAS). GAAS are those guidelines which auditors must follow while conducting an audit of a company's financial statements. It must also be stated in the audit report that the audit was conducted following GAAS.

the purpose of this article are to discuss the abandoing of interpretation 101-16/ describe some effects of interpretation 507-8 and compare and contrast global approaches to limiting accountants ' liability throug the use of engagement letter.

The duty of professionals, including accountants, lawyers, and brokers is to provide services by exercising their skills and knowledge in compliance with their respective laws and standards. However, Certified Public Accountants, how their title implies owe a duty to the public, including direct and indirect users of their work. In this case I, the CPA, have several duties to which I may be liable for under civil and criminal liability, including common and statutory law. In this section I will examine any common law liabilities that may be used in this case by both clients and third parties and any defense I may consider.

The accounting profession believes there are three conditions necessary for fraudulent behavior, as well as a responsibility to to perform quality services with integrity, objectivity, and professionalism. Accounting firms have the responsibility to hire and monitor competent personnel, so they can fulfill their assigned responsibilities. This report will explain how all three conditions were present in Anna’s actions, how Max and Company

First, Penny tells Art the risks and the consequences if he asks Penny to falsify records. Once auditors find “cooked” financial statement, Art will assume the main responsibility as a President Director. Code of ethic for professional accountant §150 states that the principle of professional behavior imposes an obligation on professional accountants to comply with relevant laws and regulations and avoid any action that may bring discredit to the profession. This includes actions which a reasonable and informed third party, having knowledge of all relevant information, would conclude negatively affects the good reputation of the profession. So if Art persists in manipulating the record, as a professional accountant, Penny should correct books records. So she cannot falsify the records and lie. In this process, Art may impede disclosure. Thus, it may be necessary for Penny to inform auditors about poor inventory

Accountants are considered to be the only person that knows you better than you know yourself, which is why the most important factor when considering an accountant is trust. They are responsible for confidentiality of financial information; record keeping by daily posting; and consulting input on market trends, real estate purchases and investments. Due to these responsibilities, accountants are obligated to act in the interest of the party and also respect the Code of Ethical Principles and Standards. In the case of Rihanna (Plaintiff) vs Berdon LLP (Defendant), Rihanna accuses her accountants of very strong claims. These claims include Rihanna losing millions due to mismanagement of her cash flow, expense, and touring income; mishandle of her taxes and failure of applying for tax returns; and lastly omission of discouragement of buying multi-million dollar house when experiencing financial problems.

In this case Eric could be held liable for different reasons. One of the reasons is the act of negligence he performed by carelessly overstating the net sales and profits when preparing the financial statements. In other words, he could be held liable under the Section 11 of the Securities Exchange Act, which talks about civil liability on accountants for misleading and exclusion of significant facts in the registration of statements.

Johnny being a certified public agent (CPA) can rationalize his behaviour by performing according to the act APES 110. In the above scenario, Johnny tried to mislead the Public Company Accounting Oversight Board (PACOB) under the pressure of his manager by manipulating the financial information and confidential information of the client prior to the submission of report to PACB. The significance of any of the unethical and dishonest behaviour can be evaluated and safeguarded by consulting with superiors within the employing organisation, professional bodies, up-to-date with internal and external audit procedures and education on ethical issues. Johnny should always act according to the fundamental principles of APES 110 and should always perform

An auditor's legal liability under common-law requires the auditor to perform professional services with due care. An auditor would cite adherence to generally accepted auditing standards as evidence of having exercised due care in conducting the audit. Lawsuits for damages under common law usually result when someone suffers a financial loss after relying on financial statements later found to be materially misstated. Plaintiffs in legal actions involving auditors such as clients or third party users of financial statements generally assert all possible causes of action, including breach of contract, tort, deceit, fraud, and anything else that may be relevant to the claim.

“When accountants complete work without recording it as chargeable time, potential revenue can be lost and erroneous planning and poor personnel decisions can result.” (Lightner, et. al., 1983)

The standards by which financial statements are reported are known as Generally Accepted Accounting Principles (GAAP) (Finkler, Jones, & Kovner, 2013).  The United States (US) recognizes GAAP to be a set of rules used by accountants in financial reporting (Finkler et al., 2013).  The United States-GAAP (US-GAAP) were established by the Financial Accounting Standards Board (FASB) (Finkler et al., 2013). The US-GAAP are primarily used in the US whereas many other countries have adopted their own general accounting standards known as the International Financial Reporting Standards (IFRS) (Finkler, Ward, & Calabrese, 2013). The IFRS were established by the International Accounting Standards Board (IASB) and have both similarities and differences to the US-GAAP (Finkler et al., 2013).   The purpose of GAAP are to standardize the manner in which the financial status of an organization is interpreted so financial information is useful for investors, lenders and those that an organization is accountable to or compared to (Finkler et al., 2013).

Since reliable financial information is essential for investors and other stakeholders to take adequate decisions, this reliability must be backed by independent review performed by independent and certified auditing firms, which are supposed to verify and certify financial statements issued by a company’s management. If the auditor is not competent and independent from management, the audit of the financial statements loses its credibility (Schelker, 2013, p.295). According to Impastato (2003), because of audit failures, accountants are to blame for investors losing billions of dollars in earnings in addition to market capitalization (as cited in Grubbs & Ethridge 2007).