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Audit Paper

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Written Assignment 1: Ethical Behavior
1. Explain why the public expects all professionals to act ethically.
The reason the public expects all professionals to act ethically is because they, the professionals, are able to carry out their duties because of public confidence. Public confidence is the trust the general public has in a person, group or profession. This public confidence is what adds value to the work the professional does. If the professional acts unethically, the professional has misused the confidence the public has given them and devalued the work they, the professional, has done.

2. Explain what is meant by independence in mind and independence in appearance.

Independence of mind is the auditor’s state of mind that permits the audit to be performed with an unbiased attitude while Independence in appearance is the publics’ interpretations of this independence. To put in in simpler terms, being independent of mind means that the auditor has no biases toward the audit client and independence in appearance means that the general public and users of the audited financial statements believes that the auditor does not have any biases towards the audit client.

3. Explain why it is necessary for auditors to maintain the appearance of their independence.
The reason the auditors have to appear independence is so that the public has confidence in the report produced. Since as an ethical professional, the public expects that the auditor would work in the best interest of the users of the financial statement, the auditor not only need to be actually unbiased but also appear unbiased so that the users of the financial statement trust the information presented to them as being reasonably without material misstatements. If the public does not think the auditor is independent, the auditor loses public confidence and the audit performed loses value.
4. Discuss and explain what ET Section 54, Article 3 – Integrity, of the AICPA Code of Professional Conduct requires of professional accountants

Section 54, Article 3 of the AICPA Code of Professional Conduct is explained in 4 paragraphs. These paragraphs help CPAs understand how to broaden public confidence in the profession while following this section of the code. The 4 paragraphs are:

1. Integrity is an element of character fundamental to professional recognition. It is the quality from which the public trust derives and the benchmark against which a member must ultimately test all decisions. 2. Integrity requires a member to be, among other things, honest and candid within the constraints of client confidentiality. Service and the public trust should not be subordinated to personal gain an advantage. Integrity can accommodate the inadvertent error and the honest difference of opinion; it cannot accommodate deceit or subordination of principle. 3. Integrity is measured in terms of what is right and just. In the absence of specific rules, standards, or guidance, or in the face of conflicting opinions, a member should test decisions and deeds by asking: "Am I doing what a person of integrity would do? Have I retained my integrity?" Integrity requires a member to observe both the form and the spirit of technical and ethical standards; circumvention of those standards constitutes subordination of judgment. 4. Integrity also requires a member to observe the principles of objectivity and independence and of due care.

The AICPA Code of Professional Conduct on integrity is saying that above all, CPAs should make decisions independently and objectively and do what is right and just in the absence of specific guidance. This section of the code tells CPAs to be truthful within the bounds of client confidentiality. To sum it up, the code is telling all accountants to be honest as the carry out their professional duties.

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