Very easy 6 Accounting Ethics questions, homework help

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1. Question: Section 100 of the Rules of the Code of Conduct discusses independence. How do we distinguish between independent in fact and independence in appearance? Please include examples. Answer: a. Independence of mind-- The state of mind that permits the performance of an attest service without being affected by influences that compromise professional judgment, thereby allowing an individual to act with integrity and exercise objectivity and professional skepticism. b. Independence in appearance-- The avoidance of circumstances that would cause a reasonable and informed third party, having knowledge of all relevant information, including safeguards 2.) applied, to reasonably conclude that the integrity, objectivity, or professional skepticism of a firm or a member of the attest engagement team had been compromised (AICPA, 2011). An example of independence of mind: Molly who is a colleague of Sue's tells Sue that she doesn't explain or include small variances anything under one million dollars because she doesn't want to be questioned about it nor does she want to spend that much time providing details. Sue uses independence of mind and continues to explain and include all variances found because she believes it's what's ethical and she prides herself in acting with integrity. An example of independence of appearance: Joe was the top accountant at his uncles firm and all of his clients felt as though he seemed independent due to the way he did business and carried himself. When Joe's uncle retired Joe took over as the CEO of the firm so that he'd have the independence his clients felt he appeared to have. ➔ Response: 2. Question: Section 100 of the Rules of the Code of Conduct discusses independence. How do we distinguish between independent in fact and independence in appearance? Please include examples. Answer : Independence in fact is based on several criteria. The obvious side of independence in fact relates to who you work for/report to. As an example, an outside auditor is hire by and reports to the audit committee, not the board or officers, which theoretically implies that the auditor's independence is not going to be compromised by the need to keep the board and officers happy. The other side of independence in fact has to do with relationships or interests the auditor might have with the client, which is also tied in with the idea of conflicts of interest. If your sister is the CFO, you're independence is comprised due to the conflict of interest. Independence in appearance is a bit trickier, because it has to do with perception. As accountants we have to maintain a certain professional distance between ourselves and our clients so that others aren't given the impression that we might favor them. For example, the code allows for certain minor considerations, such as the client taking the audit team out to dinner at the end of the audit, but if the client was letting his auditor or a member of the audit team borrow his condo in Vail to go skiing it would create the impression that the relationship went beyond professional. ➔ Response: 3. Question. What is a business? Answer: Purpose and motive The purpose and motive of a business are closely tied and related to each other. Both words give th impression of "why" behind a business. The most obvious answer is to make a profit. But the purpose and the motive are the drives why that particular action to make money. To engage in an activity which earns and income. Accounting Ethics states "There are all sorts of ways to make money, and wanting to make money is certainly okay as a motive, but the purpose of the practice of accounting is not to make money, any more than it is in the practice of medicine. Medicine' s purpose is to minister to the sick. Auditing ' s purpose is to ensure that financial statements are accurate. Thus, social practices have their own purposes, independent of the motives of the persons engaged in the practices Therefore, our motives for doing something may or may not accord with the activity ' s purpose." (p. 174). ➔ Response: 4. Question. What is a business? Answer: A business is an organization or economic system where goods and services are exchanged for one another or for money (business dictionary, 2016). As you stated Katy making a profit is the motive of any business but the has to be a greater purpose. A business is built on it's purpose and can only succeed due to the purpose of the business. The purpose is what drives the motive in the world of business. Motive is defined as the reasoning behind doing something which can be hidden agendas. Purpose is the defined as the cause of why something was done and unlike motive there is never a hidden agenda with purpose. ➔ Response: 5. Question . Did the accounting scandals of the early 2000s impact the Rules of Conduct under Sections 300, 400, and 500? What changes in our perception of these rules have we seen over the last decade? Answer: The Sarbanes-Oxley Act (SOX), also known as the Public Company Accounting Reform and Investor Protection Act of 2002, was signed into law on July 30, 2002, in response to a series of high-profile corporate accounting scandals that involved Enron, WorldCom, Tyco, Adelphia, and others. However, while the act was aimed to improve the quality of financial reporting and restore investor confidence on the integrity of corporate disclosure, it was not designed to accommodate smaller public companies' unique characteristics. In particular, Section 404 of the Act, which requires management and the external auditor to report on the adequacy of the company's internal control over financial reporting, is the most contentious part of SOX and has generated disproportionate cost burden for smaller public companies. The impact of Section 404 on smaller public companies has yet to be fully revealed as the Securities and Exchange Commission (SEC) has further extended the compliance deadline. Smaller public companies performing their first management and auditor assessment in the near future will find their compliance with Section 404 particularly challenging. Past evidence has shown that the costs of Section 404 have exceeded the benefits of strengthened invest or protection for smaller public companies. As the compliance burden is falling upon nonaccelerated filers that comprise the bulk of all public companies and may seriously jeopardize their competitiveness and growth potential, it is high time we take a second look at the appropriateness of SOX Section 404. ➔ Response: 6. Question: What is the purpose of the IMA Code of Professional Conduct? What are the key elements? How is this similar to the AICPA Rules of Conduct? How is it different? Answer: There are a couple of similarities of what is provided by the IMA and the AICPA. Both the IMA and AICPA both provide opportunities for continuing education, standards are set for the accountants in both, and there are options for certifications as well. Individuals within each have to adhere to the set code of ethics. The differences within the two is their main focus. The focus of the IMA helps accountants within the business. The AICPA helps accountants that serve outside the business. The IMA uses the financial data to assist management of the company to make their decisions whereas AICPA helps accountants provided financial information to the company's investors. Lastly, IMA helps the accountants serve customers within the organization rather than outside of the organization as provided by the AICPA. ➔ Response:
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