Table of Contents

Chapter 1 - Professional Ethics for Illinois CPAs - Section 1. 9

Ethics Background. 9

Morals. 9

What is Ethics?. 9

The Relationship of Morals and Ethics. 10

Illustrative Examples of Ethics. 11

Professional Ethics. 13

Legal versus Ethical 13

Why Should We Study Professional Ethics?. 13

Accounting Ethics. 14

Ethical Core Foundations for CPAs. 14

Chapter 1 - Section 1 Review Questions. 16

Chapter 1 - Professional Ethics for Illinois CPAs - Section 2. 17

Ethical Reasoning. 17

Case Studies – Threats and Safeguards. 18

Ethical Dilemmas. 20

Public Expectations of the CPA’s Responsibility. 20

Enron and Arthur Andersen. 21

Bernard Madoff Investment Securities LLC – Failures in Expressing an Opinion on Financial Statements  22

Motivations of Ethical Lapses. 24

Chapter 1 - Section 2 Review Questions. 25

Chapter 1 - Professional Ethics for Illinois CPAs - Section 3. 26

225 ILCS 450/16. 26

Sec. 16. Expiration and renewal of licenses; renewal of registration; continuing education; peer review. 26

TITLE 68: PROFESSIONS AND OCCUPATIONS. 29

Section 1420.70 Continuing Professional Education. 29

Section 1420.75 Peer Review.. 34

Section 1420.200 Unprofessional Conduct 38

Chapter 1 - Section 3 Review Questions. 40

Chapter 1 - Professional Ethics for Illinois CPAs - Section 4. 41

The AICPA Code of Professional Conduct 41

About the Code. 41

Preface. 41

Part 1 – Members in Public Practice. 42

Rule 1.100 Integrity and Objectivity. 44

Case Study – Married Tax Clients Divorcing. 45

1.130 Preparing and Reporting Information. 46

Case Study – Year End Adjustments and Loan Covenants. 46

1.200 - Independence. 47

Chapter 1 - Section 4 Review Questions. 52

Chapter 1 - Professional Ethics for Illinois CPAs - Section 5. 53

Rule 1.300—General Standards Rule. 53

Case Study – Audit Engagement with No Prior Experience. 54

1.310 Compliance with Standards Rule. 54

Case Study – Peer Review Discoveries. 54

1.320 Accounting Principles Rule. 55

1.400.001 Acts Discreditable Rule. 55

1.510.001 — Contingent Fees Rule. 56

1.520.001—Commissions and referral fees Rule. 58

1.600.001 —Advertising and other forms of solicitation. 59

1.700.001— Confidential client information rule. 59

1.800.001—Form of organization and name rule. 61

Chapter 1 - Section 5 Review Questions. 62

Chapter 1 - Professional Ethics for Illinois CPAs - Section 6. 63

Part 2 – Members in Business. 63

2.100.001 – Integrity and Objectivity Rule. 66

2.130.030 Obligation of a Member to His or Her Employer’s External Accountant 67

2.170.010 – Pressure to Breach the Rules. 67

Case Study – Fair Finance. 68

2.300.001 — General standards rule. 68

2.310.001—Compliance with standards rule. 69

2.320.001—Accounting principles rule. 69

Case Study - The Company with Excess Reserves. 70

Case Study - The Company with Undisclosed/Unrecorded Contingencies. 71

2.400.001 Acts Discreditable Rule. 71

2.400.070 Confidential Information from employment or volunteer activities. 72

Part 3 – Other Members. 72

3.400.001 - Acts discreditable rule. 73

3.400.070 Confidential Information from employment or volunteer activities. 73

Chapter 1 - Section 6 Review Questions. 74

Answers to Review Questions. 75

Chapter 1 - Section 1 Review Questions Feedback. 75

Chapter 1 - Section 2 Review Questions Feedback. 76

Chapter 1 - Section 3 Review Questions Feedback. 77

Chapter 1 - Section 4 Review Questions Feedback. 79

Chapter 1 - Section 5 Review Questions Feedback. 82

Chapter 1 - Section 6 Review Questions Feedback. 84

Glossary. 85

Index. 86

Final Examination. 88

CPASelfstudy.com Course Evaluation. 92