You are the tax manager in a CPA office. One of your clients, Snapper Corp, is...

You are the tax manager in a CPA office. One of your clients, Snapper Corp, is also an audit client of the firm. The CFO of Snapper invites you and the audit manager for a one-week deep-sea fishing trip to Mexico, all expenses to be paid by Snapper. The audit manager says that you both should go and just not tell your supervisor at the CPA firm any details (like who paid the expenses) about the trip. Cite the AICPA Code of Professional Conduct to support your answer to the following:

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AICPA Code of Professional Conduct

The value of auditing is dependent on the public perceptions of the independence of an auditor. Since the auditor is reporting to the third party who are the users, external to the company and if those users believe that auditor lacks independence then the whole purpose of audit is failed. That’s why it is important that independence is maintained.

As per AICPA’s Professional Code of Conduct (Independence Rule )

Independence consist of two components. First one is Independence of Mind (also refers to as Independence in Fact) which implies that the auditor should not be biased toward your client and work with integrity, have a character of intellectual honesty and candour, and objectivity.

Second one is Independence of appearance. Appearance here implies that an auditor should not be seen advocating for the client. Auditor can be seen advocating for the client if on regular basis he is hanging out with the client like going for wine and dine or playing golf with the client or like going on vacation with the client. An auditor may still be independent in fact but in appearance it will be perceived by the informed third party having knowledge of all relevant information that the auditor’s integrity, objectivity and professional scepticism has been compromised.

So, the Professional code of conducts requires that auditor should maintain independence both in fact and in appearance.

In the present scenario as a Tax Manager in a CPA office i.e. member of CPA, it is not advisable to go on a Fishing trip with the client because it will lead to a breach of independence in appearance as discussed above.

As far as audit manager is concerned he also has an equal responsibility to maintain independence, and adhere to professional ethics, integrity, intellectual honesty and objectivity.

ekkarill92 answered 1 year ago

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