Free Essay

Rule 301 Confidential Client Information

In: Business and Management

Submitted By mli120656
Words 528
Pages 3
Rule 301 of the American Institute of Certified Public Accountants’ professional standards states that a member CPA “shall not disclose any confidential client information without the specific consent of the client.” Auditing documentation should not be made available to outside parties without the authorizing of the client. Although the protection of a client’s information is an important principle of being professional, the member need to release the information under certain circumstance. Here are four exceptions of Rule 301:

1. Compliance with rules 202 (compliance with standards) and 203 (accounting principles) as set forth by the AICPA Code of Professional Conduct. When a member discovers criminal activity or fraud, or an activity the member reasonably expects is criminal or fraudulent based upon his or her good faith belief that there may be a crime or fraud, on the part of his client or employer, the member shall report the illegal activity or fraud to the appropriate supervisor above the person or persons who the member suspects of the illegal activity.

2. Compliance with enforceable subpoena or summons, or must comply with applicable laws ad government regulations. In practice, the member may receive informal request, Civil Subpoenas or Grand Jury Subpoenas. Not all civil subpoenas are valid or enforceable but you may need to comply the grand jury subpoenas because that is a method for a federal grand jury to gather evidence in a criminal matter sufficient to consider indictment. Whenever you are asked to respond to either a formal or informal request for information regarding a client, you should seek the advice of the legal advisor to ensure you are in compliance with such regulations. The member must inform the client about a subpoena.

3. AICPA review of professional practice. If there is a review of a CPA’s practice under AICPA or state society authorization, the member should release the appropriate information.

4. Initiating complaint or responding to inquiry made by a recognized investigative or disciplinary body.

Interpretation 301-3 address that a member who is considering selling his or her practice, or merging with another CPA, may allow that CPA to review confidential client information without the specific consent of the client. This exception do not apply to the review of working papers after a CPA has purchased another’s practice. Under this situation, the successor who wants to review the working papers should insure that the predecessor is authorized by the client to release information. To clarify the obligation of both parties, the member should take appropriate precautionary measures. For example, obtain a written confidentiality agreement. I believe, the most important principle is keeping communicate with the client. For example, it is very important to immediately notify the client when the member received a subpoena because the client may want to challenge the issuance of the subpoena.

Reference CPA Duties of Confidentiality - NYSSCPA.ORG | The Web Site of ... (n.d.). Retrieved from http://nysscpa.org/printversions/tp/404b/article13.htm

Client Confidentiality and Fraud - Association of Certified ... (n.d.). Retrieved from http://www.acfe.com/article.aspx?id=4294968847

Improper Release of Proprietary Information. (n.d.). Retrieved from http://www.nysscpa.org/printversions/cpaj/2008/308/p52.htm

Similar Documents

Free Essay

Accountant Responsibility

...a responsibility a number of parties, with the major parties in this case being the government, clients and third parties. In today’s capitalist society, the accounting profession is deemed to be a common and important feature. Discussing the responsibilities accountants have to the three parties identified above would, therefore, certainly be a prudent and logical move. Responsibility to Clients To begin with, accountants have a responsibility to keep client information confidential. If an accountant discloses confidential client information to a third party, such an accountant would be deemed to have violated Rule 301. The said rule, in simple terms, states that “a member CPA shall not disclose any confidential information without the specific consent of the client” (Perkins, 2004). In that regard, therefore, an accountant must obtain the consent of the client before disclosing information which could be regarded confidential. The said consent could be in writing. It should, however, be noted that an accountant cannot be deemed to have violated Rule 301 if the information disclosed already happens to be in the public domain. Similarly, an accountant cannot be held liable for the violation of client confidentiality if disclosures of client information are made pursuant to proceedings of a legal nature. Yet another critical responsibility of accountants to their clients has got to do with exercise of due professional care. This essentially means that should an......

Words: 1785 - Pages: 8

Premium Essay

Audit

...stock for the company in which they are responsible for reporting the audit for, even if the client is out of another office. The audit report must be from an individual that is independent of the company. As for the professional staff members, they too can not own stock with any of the clients they conduct audits with, if they have been assigned to engagement or if they become partner of the office. The stock they own can only be for companies they do not participate in any audit engagements. Violation: • A partner of John Burkes, CPA, of Woodstock, GA. owns stock for his partner’s client. His partner’s office is located out of Atlanta, GA. • A professional staff auditor owns stock for J& J’s Manufacturing Co. His manager states that one of the auditors has quit and left the engagement and they need them to fill it. The professional auditor takes his place. 4-18 A. 1) the auditor must be without bias with respect to the client under audit. B. 3) involves the objective examination of and reporting on management prepared statements. C. 1) maintains public confidence in the profession. 4-19 A. 1) a fee based on whether the CPA’s report on the client’s financial statements results in the approval of a bank loan B. 3) Disclosing confidential information to another accountant interested in purchasing the CPA’s practice. C. 3) prohibited under the AICPA rules of conduct. 4-20 A) Yes B) No C) No D) No because recommending tax shelters is not......

Words: 1574 - Pages: 7

Premium Essay

Auditing

...paragraphs for the definition and limitations of internal control. b. (3) Completion of all important audit procedures. c. (3) Portion of the financial statements audited by the other auditor. 3-24 a. (3) Unqualified opinion. b. (4) Unqualified opinion with explanatory paragraph. c. (1) Indicate a division of responsibility. 3-25 a. (3) A qualified “except for” opinion or adverse opinion. b. (2) Management does not provide reasonable justification for a change in accounting principles. c. (3) Qualified opinion. 3-26 a. The financial statements mentioned as “correctly stated” imply absolute accuracy but the other report states that no material misstatements exist. b. The reference to GAAP specifies the rules that were followed for transactions but “true economic conditions” does not identify specific procedures that are applied. c. The “opinion” paragraph it not intended for certification/guarantee of the accuracy of the statements but it is intended as an expression of professional judgment upon reasonable audit. d. Only the name of the CPA firm is required to appear on the accountant’s report because the firm as a whole accepted the responsibility. e. The performance of the audit to detect misstatements of the material in the financial statements is a flaw because the general purpose of the audit is to determine if the financial statements are stated fairly but the conduction of the audit in accordance to auditing......

Words: 958 - Pages: 4

Premium Essay

Acct 3

...remedial action. If they do not take the right action then Barber must communicate within one day to the Securities and Exchange Commission. They are also able to fill out the Form 8-K and resign if they feel that senior management has lost integrity due to illegal activities. 3–43. Thomas Gilbert and Susan Bradley formed a professional corporation called “Financial Services Inc.—A Professional Corporation,” each taking 50 percent of the authorized common stock. Gilbert is a CPA and a member of the AICPA. Bradley is a CPCU (Chartered Property Casualty Underwriter). The corporation performs auditing and tax services under Gilbert’s direction and insurance services under Bradley’s supervision. One of the corporation’s first audit clients was Grandtime Company. Grandtime had total assets of $600,000 and total liabilities of $270,000. In the course of his examination, Gilbert found that Grandtime’s building with a carrying value of $240,000 was pledged as collateral for a 10-year term note in the amount of $200,000. The client’s financial statements did not...

Words: 971 - Pages: 4

Premium Essay

Abrar

...Auditing and Assurance Services, 15e (Arens) Chapter 4 Professional Ethics Learning Objective 4-1 1) Ethics are: A) needed in the professions, but is not needed for society in general. B) a set of moral principles or values. C) not formed by life experiences. D) always incorporated in laws. Answer: B Terms: Ethical Principles Diff: Easy Objective: LO 4-1 AACSB: Ethical understanding and reasoning abilities 2) ________ means that a person acts according to conscience, regardless of the situation. A) Caring B) Fairness C) Integrity D) Respect Answer: C Terms: Ethical principles and integrity Diff: Moderate Objective: LO 4-1 AACSB: Ethical understanding and reasoning abilities 3) One of the main reasons people act unethically is that they choose to act selfishly. A) True B) False Answer: A Terms: Ethical Principles Diff: Easy Objective: LO 4-1 AACSB: Ethical understanding and reasoning abilities Learning Objective 4-2 1) A six-step approach is often used to resolve an ethical dilemma. The first step in this process is to: A) identify the alternative actions available. B) identify the ethical issues from the facts. C) determine who will be affected by the outcome of the dilemma. D) obtain the relevant facts. Answer: D Terms: Ethical dilemma Diff: Moderate Objective: LO 4-2 AACSB: Ethical understanding and reasoning abilities 2) Describe an ethical dilemma that an auditor or an accountant might face in......

Words: 11216 - Pages: 45

Premium Essay

Smackey Dog Food

...Smackey Dog Food Inc. has hired my firm and me, Keller CPAs, to complete an audit of their company and its financial statements. To continue being the successful company that they are, Sarah, Kim, and Jillian need to get better control of the company in its aspects of general business including inventory control and accounting. From the looks of things now, they are failing and headed in a downward spiral if they way things are happening continue. One of our jobs as an auditing company is to locate and address any issues and concerns with the audit and how we will proceed. Upon first glance at Smackey Dog Food, there are a couple of key issues and concerns that the company is currently experiencing. The first prominent issue that I see with the company is a serious lack of internal control starting from the very top. No one person seems to be in control of anything and the different areas of the business are being run as the sisters see fit which is not a good business practice. Sarah is trying to secure a bank loan using the accounts receivable as collateral and basing whether they will be able to pay down the loan by Jillian’s sales team projections. Problem there is that Jillian’s sales team is earning commissions on sales that they are not even getting because Jillian wants to be liked and costing the company about 11% average in profits. If the sales projections are off, they run the risk of not being able to pay back the loan like they assumed and the expansion that is......

Words: 2070 - Pages: 9

Premium Essay

Cpa Responsibility

...Responsibility to Clients and the Profession Abstract The professional responsibilities of a Certified Public Accountant (CPA) to their clients were investigated. The responsibilities were determined by the American Institute of Certified Public Accountants Code of Professional Conduct. Specifically, Rule 102 regarding integrity and objectivity was used to determine what constituted as integrity and objectivity in the practice of a CPA acting as the moral conscience of their client. Rule 301 was used to determine whether information should be disclosed in the instance of fraud. Based on the information in the code of professional conduct, it was determined that CPAs have a responsibility for the greater public interest in determining the appropriate actions to be taken regarding potential fraud. Certified Public Accountants (CPAs) providing services such as accounting, taxation, audit, attestation, and other related services have a responsibility to serve small businesses as a moral conscience. Small businesses are focused on growing their business. As a result, the small business has big dreams. Many times the owners of small businesses are good at doing the service they perform; however, they often prefer that licensed professionals oversee the accounting function. Although CPAs have a responsibility to their clients they are not to act as the moral conscience, rather, they should act as a moral conscience, CPAs should turn in clients who are knowingly......

Words: 1644 - Pages: 7

Premium Essay

Acc 555 Week 2 Hw

...is not an audit client. No c. Implementing a financial information system designed by management for a private company. No d. Recommending a tax shelter to a client that is publicly held. The services were pre-approved by the audit committee. No e. Providing internal audit services to a public company client with the pre-approval of the audit committee. Yes f. Providing bookkeeping services to an audit client that is a private company. No 4-21 a. Rule 101 - Independence. No violation. If the services performed conform to the requirements of Interpretation 101-3, independence of Emrich would not be considered to be impaired. There would be a violation of SEC rules if the client were publicly held. b. Rule 101 - Independence. No violation. Franz Marteens is not a partner nor is he assigned to the engagement team for the audit client. c. Rule 201 - General Standards. Violation. Interpretation 201-1 states that a member who accepts a professional engagement implies that he or she has the necessary competence to complete the engagement according to professional standards. Wilkenson has violated the rule since he does not have the expertise to review the work of the consultant hired by Wilkenson. Wilkenson should have suggested that the company hire the consultant directly. d. Rule 102 - Integrity and Objectivity. Violation. This rule states that in tax practice, a member may resolve doubt in favor of his or her client as long as......

Words: 1887 - Pages: 8

Premium Essay

When Is Resignation Not Enough- an Ethical Dilemma

...Memo RE: When Is Resignation Not Enough – An Ethical Dilemma FACTS: In 1989, Page Nolan left Smith, Jones, & Brown CPA firm to work as a controller for Anonymous Company. The main focus of her job was to keep the books for the many business units and see that income and expenses were assigned properly, while all government requirements were met. Nolan soon realized that the company was incorrectly booking consulting fees. The consulting expenses were correctly stated, to bring the profit margin down to an acceptable amount for the government projects, however since the consultant was part of the company, this revenue was incorrectly recorded as donated capital. Nolan was told not to worry about this method of accounting by the manager of this segment of the business and the head of the company. Page went to his past employer who was also the current CPA firm for the company but was brushed off by the partner she approached. Not knowing what else to do, but uncomfortable with the situation, Page Nolan resigned. ISSUES: 1. What is illegal about Anonymous Company’s accounting method? 2. What professional standards does Page Nolan have to abide by as a CPA who is now working for a private company? 3. What steps should Page Nolan take, by law, other than resigning? What responsibilities does she have to the CPA firm, government agencies, and Anonymous Company? 4. What are the responsibilities of SJ & B CPA firm? CONCLUSIONS: 1. Anonymous Company does...

Words: 1938 - Pages: 8

Free Essay

English

... | | | | | | | |Reason through an ethical decision problem using the imperative, | |55, 56, 57 | |utilitarian and generalization principles of moral philosophy. | | | | | | | |Identify the different entities that make ethics rules for CPAs and |5, 6 | | |public accounting firms. | | | |...

Words: 11550 - Pages: 47

Premium Essay

Smackey Project

...of Smackey Dog Foods, Inc. The Securities and Exchange Commission assists in providing investors with reliable information upon which to make investment decision. The SEC has considerable influence in setting generally accepted accounting principles and disclosure requirement for financial statements as a result of its authority for specifying reporting requirements considered necessary for fair disclosure to investors. The SEC has power to establish rules for any CPA associated with audited financial statement submitted to the commission. The SEC adopted rules strengthening auditor independence in January 2003 consistent with the requirements of the Sarbanes-Oxley Act. The SEC rules further restrict the provision of nonaudit services to audit clients, and they also include restrictions on employment of former audit firm employees by the client and provide for audit partner rotation to enhance independence. Although Smackey Dog Foods, Inc. is nonpublic companies, independence rule is applied same as public. Q2: Discuss the essential activities involved in the initial planning of an audit. How do these all specifically to the Smackey Dog Food client? Initial audit planning involves four things, all of which should be done early in the audit: 1. The auditor decides whether to accept a new client or continue serving an existing one. Smackey is a new client for Keller CPA. Before they accept the audit, Keller CPA examines the prospective Smackey’s standing in the......

Words: 1802 - Pages: 8

Premium Essay

Smackey Dog Food

...to determine if they will approve a second loan. The company wants to use receivables to secure the loan. We have been hired to conduct an audit of the financial statements. The SEC has no influence over the audit since Smackey is a private company; however, since Keller CPA is auditing the financial statements we will be following GAAP. Although the SEC has no influence we will be following any guidelines put forth by the SEC in regards to private companies to determine the financials are presented fairly. In the future if Smackey should decide to go public there are numerous steps that will need to be followed. We have assigned Peter as the audit manager and he will be assisted by Ben and Maureen. They will assess the client and plan the audit. The initial planning involves four things to be done early in the audit. The first step is to decide if we will accept the audit. We have decided to accept even though it is late in the year and we have never audited this type of business before. We have determined the reason for the audit, which will affect the remaining planning for the audit, is that Smackey Foods is trying to secure a loan and the bank has asked for an audit of the...

Words: 1837 - Pages: 8

Premium Essay

Internal Control

...CHECKPOINTS 3.1 This arises from the three party accountability discussed in chapter 1. The auditor is hired because users expect there may be such a conflict. If users completely trusted management there would be no need to have an auditor. This is the only way to detect fraudulent or misleading reporting. The logic is to reduce this potential to an acceptable level of risk. If the auditor assumed this risk was zero to start with the auditor would not need to provide evidence that the possibility is low, and that contradicts the reason users demand an audit. 3-2 No, the auditor cannot detect deception without being skeptical. A non-skeptical auditor on finding evidence of fraud may not treat it with the significance it deserves. The rule that suspicious transactions or evidence of management deceit should automatically be considered material, even when the absolute amounts involved may be very small or insignificant, is an example of skeptical logic in action. Since three party accountability implies some degree of mistrust of management by users, the auditor must incorporate skepticism in his or her reasoning process when management makes assertions about the financial statements it has prepared. 3-3 A professional accountant must be prepared to be agent, spectator, advisor, instructor, judge, critic. 3-4 Apparently, in ethical philosophy, the word "conscience" is used to describe the "undefinable mental process that yields moral decisions."......

Words: 5626 - Pages: 23

Premium Essay

Sp Paper

...Executive summery As professionals, certified public accountants perform an essential role in society. Consistent with that role, members of the Society of Certified Public Accountants have responsibilities to all those who use their professional services. Members also have a continuing responsibility to cooperate with each other to improve the art of accounting, maintain the public's confidence, and carry out the profession's special responsibilities for self-governance. We worked in this paper about the ethical dilemmas using an ethical framework, the AICPA code of rules and interpretation on independence and it’s importance and the requirements of other rules under the AICPA. We found that in some cases the rules of conduct is applied accurately and in other situations violation of code of conduct, rules of conduct is existed. Ethics in professional accountancy are of utmost importance. Now as the business and financial world is adopting international accounting and auditing standards, it is becoming all the more necessary to adhere to certain Code of Ethics prescribed by international and national accountancy bodies. Accountants practicing in all segments of accounting need to understand both the relevant ethical standards of accounting and the mechanisms for enforcing these ethical standards. Further, accountants need to have an understanding of how to apply these standards in practical situations. In 1988, the AICPA restructured the profession's Code of......

Words: 12621 - Pages: 51

Premium Essay

Aicpa

...must pass the Uniform CPA Examination to qualify for a CPA certificate and license (i.e., permit to practice) to practice public accounting. While the exam is the same no matter where it's taken, every state/jurisdiction has its own set of education and experience requirements that individuals must meet. *Most states/jurisdictions require at least a bachelor's degree to be eligible to become a CPA. Learn more about educational requirements. * As for experience, most states/jurisdictions require at least two years public accounting experience. * 2) Sets requirements for maintaining member’s professional competence. Licensed CPAs are subject to regulation by their respective state boards of accountancy and strict professional ethics rules adopted by the boards to protect the public against fraud, incompetence and conflicts of interest. In addition, members of the American Institute of CPAs have to adhere to the AICPA Code of Professional Conduct, which sets forth certain standards of professional conduct. The Statement on Responsibilities in Personal Financial Planning Practice establishes guidance for AICPA members who provide personal financial planning services. This guidance applies whether personal financial planning services are provided on a stand-alone basis or as part of another engagement, and whether such services are provided on a comprehensive, segmented or consultation basis. 3)Assists members in the continuing development of professional......

Words: 540 - Pages: 3