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Business Ethics

Spring 2010

Ethics in Auditing: The Auditing Function Duska and Duska The main role of the independent auditor

The virtues of integrity and honesty

Trust What would happen if everybody misrepresented the financial health of their company when it was to their advantage to lie?

Liars want a double standard

The Auditors Responsibility to the Public What are the differences between an auditor and, for example, an attorney when it comes to the relationship to the paying client?

The Root of Conflicts of Interest

The Auditors Basic Responsibilities Financial statements presented fairly in accordance with generally accepted accounting principles

According to Duska and Duska, what is the relationship between fair presentation and GAAP?

The evaluation of internal auditing control and Enron

Business Ethics

Spring 2010

Reporting Errors and the Duty of Confidentiality

Independence Total independence Independence in fact and independence in appearance

Auditor independence freedom from those pressures and other factors that compromise, or can reasonably be expected to compromise, and auditors ability to make unbiased audit decisions

Why do Duska and Duska claim that Compliance with the rules is a necessary, but not a sufficient, condition for independence?

4 activities necessary to evaluate auditor independence: 1. Assessing the level of independence risk

2. Determining the acceptability of the level of independence risk

3. Considering benefits and costs

4. Considering interested parties views in addressing auditor independence issues

Conclusion Do you agree with Duska and Duskas claims about the responsibilities of the independent auditor?

Business Ethics

Spring 2010

The Structural Origins of Conflicts of Interest in the Accounting Profession Colin Boyd Conflicts of interest in large audit firms

The Modern Evolution of Public Accounting Firms The rise of national organizations, the merging of accounting firms, and auditing as low profit

What is opinion shopping and why did it begin to create conflicts of interests in auditing?

The Pressures on Labor Inputs Competitive prices, Reducing costs, and Labor as the main cost of auditing

Increased employment of junior auditors, and auditors being employed by audit clients

What conflicts of interest were created by the practice of auditors being hired by the firms audit clients?

The Strategy of Horizontal Integration The benefits of a low cost audit paving the way for high cost consulting services

Conflicts of Interest between Auditing and Consulting What conflicts of interest were created from the sale of consulting services to audit clients?

Business Ethics

Spring 2010

The Power and Influence of the Big Five The power of the Big Five and conflicts of interest within the accounting institutions

The power of the Big Five and conflicts of interest within the political system

Will the Sarbanes-Oxley Act Work? Reducing, but not eliminating, conflicts of interest

The Future Evolution of the Profession Why is Boyd skeptical that the accounting profession is capable of self-regulation?