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Duties expected of a profession:
- Competence
- Objectivity
- Integrity
- Confidentiality
- Discipline
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When does a fiduciary relationship exist?
When service provided is extremely important to the client, and where there is a significant difference in the level of expertise, such that the client has to rely upon the judgement of the professional.
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Features of the accounting proffession
- Fiduciary services to society
- Extensive knowledge and skill
- Training and skill are intellectual
- Overseen by self-regulating membership organization
- Accountable to government authority
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Duties essentail to a fiduciary relationship
- Continuing attention to needs of client/stakeholders
- Development and maintenance of required knowledge/skills
- Maintenance of trust
- Maintenance of acceptable personal reputation
- Maintenance of a credible reputation as a profession
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Rights permitted in most jurisdictions
- Ability to hold oneself out as a designated professional to render important fiduciary services
- Ability to set entrance standards and examine candidates
- Self-regulation and discipline based on codes of conduct
- Participation in the development of accounting/audit practice
- Access to some or all fields of accounting and audit endeavor
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Values necessary to discharge duties and maintain rights
- Honesty
- Integrity
- Objectivity
- Desire to exercise due care and professional skepticism
- Competence
- Confidentiality
- commitment to place the needs of the public, client, profession, and employer before self-interest
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Technical imperative
If something can be done, it should be done
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What aspects should be kept confidential?
Those aspects of the client/employer that you might not agree with, but which may not impact on the financial activities of the company sufficiently to be of concern to the public.
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SOX banned these nonaudit services:
- Bookkeeping
- Financial information systems design and implementations
- Appraisal or valuation services
- Actuarial services
- Internal audit outsourcing
- Management function/human resources
- Broker/Dealer, investment adviser
- Legal services and expert services unrelated to the audit.
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Three situations that would impair auditor independence
- An auditor cannot function in the role of management
- An auditor cannot audit their own work
- An auditor cannot serve in an advocacy role for their client
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Credibility
The critical value added by professional accountants in the newer assurance services as well as the traditional ones.
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Kohlberg's Six Stages of Moral reasoning
- Preconventional
- 1. Obedience
- 2. Egotism
- Conventional
- 3. Interpersonal concordance
- 4. Law and duty (social order)
- Post-conventional, Autonomous, or Principled
- 5. General individual rights and standards agreed upon society
- 6. Self-chosen principles
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Motives for Kohlberg's stages
- Self-Interest
- 1. Fear of punishment
- 2. Self-gratification
- Conformity
- 3. Role expectation/approval from others
- 4. Adherence to moral codes
- Interest in others
- 5. Concern for others and broader social welfare
- 6. Concern for moral/ethical princple
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Sources of ethical guidance
- Standard setters
- Commonly understood standards of practice
- Research studies and articles
- Regulator's guidelines
- Court decisions
- Codes of conduct
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