Table of Contents

Chapter 1 - General Ethics for CPAs - Section 1. 9

Ethics Background. 9

Morals. 9

What is Ethics?. 9

The Relationship of Morals and Ethics. 10

Illustrative Examples of Ethics. 12

Professional Ethics. 13

Legal versus Ethical 14

Why Should We Study Professional Ethics?. 14

Accounting Ethics. 14

Ethical Core Foundations for CPAs. 15

Chapter 1 - Section 1 Review Questions. 16

Chapter 1 - General Ethics for CPAs - Section 2. 17

Ethical Reasoning. 17

Case Studies – Threats and Safeguards. 18

Ethical Dilemmas. 20

Case Studies of Ethical Lapses. 21

Enron and Arthur Andersen. 21

The Travel Expense Department 22

Motivations of Ethical Lapses. 23

The AICPA Code of Professional Conduct 24

About the Code. 24

Preface. 25

Part 1 – Members in Public Practice. 25

Rule 1.100 Integrity and Objectivity. 28

Case Study – Married Tax Clients Divorcing. 29

1.130 Preparing and Reporting Information. 30

Case Study – Year End Adjustments and Loan Covenants. 31

Case Study – Bernard Madoff Investment Securities LLC.. 31

Case Study – Phar-Mor. 34

1.200 - Independence. 35

Chapter 1 - Section 2 Review Questions. 40

Chapter 1 - General Ethics for CPAs - Section 3. 41

Rule 1.300—General Standards Rule. 41

Case Study – Audit Engagement with No Prior Experience. 42

1.310 Compliance with Standards Rule. 42

Case Study – Peer Review Discoveries. 42

1.320 Accounting Principles Rule. 43

1.400.001 Acts Discreditable Rule. 44

1.510.001 — Contingent Fees Rule. 45

1.520.001—Commissions and referral fees Rule. 46

1.600.001 – Advertising and other forms of solicitation. 47

1.700.001 – Confidential client information rule. 48

1.800.001—Form of organization and name rule. 50

Chapter 1 - Section 3 Review Questions. 51

Chapter 1 - General Ethics for CPAs - Section 4. 52

Part 2 – Members in Business. 52

2.100.001 – Integrity and Objectivity Rule. 56

2.130.030 Obligation of a Member to His or Her Employer’s External Accountant 57

Case Study – Fair Finance. 57

2.300.001 – General standards rule. 58

2.310.001—Compliance with standards rule. 59

2.320.001—Accounting principles rule. 59

Case Study - The Company with Excess Reserves. 60

Case Study - The Company with Undisclosed/Unrecorded Contingencies. 61

2.400.001 Acts Discreditable Rule. 61

2.400.070 Confidential Information from employment or volunteer activities. 62

Part 3 – Other Members. 63

3.400.001 - Acts discreditable rule. 63

3.400.070 Confidential Information from employment or volunteer activities. 63

Chapter 1 - Section 4 Review Questions. 65

Chapter 1 - General Ethics for CPAs - Section 5. 66

Overview of Treasury Department Circular No. 230. 66

Summary of Key Sections of Circular 230. 66

Who can Practice Under Subpart A.. 67

Duties and Restrictions Imposed by Subpart B.. 69

Sanctions for Violations Imposed by Subpart C.. 72

Rules for the Conduct of Disciplinary Actions Under Subpart D.. 74

Chapter 1 - Section 5 Review Questions. 75

Answers to Review Questions. 76

Chapter 1 - Section 1 Review Questions Feedback. 76

Chapter 1 - Section 2 Review Questions Feedback. 77

Chapter 1 - Section 3 Review Questions Feedback. 80

Chapter 1 - Section 4 Review Questions Feedback. 83

Chapter 1 - Section 5 Review Questions Feedback. 84

Glossary. 86

Index. 88

Final Examination. 90

CPASelfstudy.com Course Evaluation. 94