Quiz 19: Professional Conduct, Independence, and Quality Control

Business

Utilitarianism - Utilitarian theory identifies the real measures of pros and cons on any particular action. It focuses on the results or consequences of an action on the individuals affected. The theory intends the interests for all the parties, not for only one party. Rights-based approach - Rights-based approach of ethical behavior assumes that every individual has certain rights, and it is the duty of all individuals to respect each other's rights. So, if a decision maker pursues with a theory of right to undertake an action, then it is his duty not to violate the rights of any individual. Justice-based approach - Justice-based approach of ethical behavior is concerned with the matter of equality, fairness and impartiality. This theory assumes that the decisions made regarding the distribution of resources among the interested parties should be fair and equitable.

Ethics and Professionalism in Public Accounting Though Company K experienced federal indictments, conviction of top executives and bankruptcy, it was able to continue its business. But the reputation of accounting firm A, which was financially strong, was destroyed by a single federal indictment. Company K survives with physical assets. The accounting firm A, though financially strong, could not survive because the main strength of the firm was its integrity, proficiency, and capability; but not its assets. The business of Company K was reorganized and continued even after filing for bankruptcy, because the lost assets were earned. But the reputation of accounting firm A cannot be restored, as the main assets are its clients and not physical assets.

Standards and Rules for Professional Conduct The nongovernmental association , American Institute of Certified Public Accountants (AICPA), through the Auditing Standards Board (ASB) establishes standards and rules for the professional conduct of public accountants. The Securities Exchange Commission (SEC) has legal authority to supervise the professionals of public sector. But the accounting and auditing standards for the audits of public company are set by private entities such as the Financial Auditing Standards Board (FASB) and the American Institute of Certified Public Accountants (AICPA). However, in 2003 the Public Company Accounting Oversight Board (PCAOB) adopted the professional standards and the Code of Professional Conduct which was established by the AICPA. The SEC and PCAOB have added more stringent standards regarding the conduct and independence of public company auditors, which differ from the AICPA rules and standards. At present, the Code of Professional Conduct which is maintained by the PCAOB is very similar to Code of Professional Conduct created by the AICPa.

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