Code of Ethics for Professional Accountants: A Case Study Analysis

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CODE OF ETHICS FOR PROFESSIONAL
ACCOUNTANTS
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PART A
The two fundamental principles of professional ethics which have been violated in the case are:
Integrity: The Company, Corporate Resource Services and its members (auditors) have violated
the fundamental principle of integrity as it had not paid its tax liability and has provided
misleading audit reports (Martinov-Bennie and Mladenovic, 2015). The members of the
company were needed to be straightforward and honest in all their business and professional
relationships. However, in this case the members of the company have also breached this
fundamental principle by being knowingly associated with such report or information which they
knew is misleading (Payne et al, 2019). Not only had this, after providing misleading audit
reports, the company claimed for bankruptcy so that it could save itself from paying back the
unpaid tax liability and by doing so the principle of integrity have been violated, both by the
auditors and the members of the company.
Professional behavior: The partners of the CRS’s audit firm Crowe LLP have also violated the
fundamental principle of professional behavior by not being compliant with the relevant laws
and regulations (Carratti et al, 2018). Moreover, the company has been non-compliant to the
Account Purchase Agreements with Wells Fargo, which implies the unprofessional and
irresponsible behavior of the members of the company. These persons have been non-compliant
to the Public Company Accounting Oversight Board and also for providing misleading audit
reports (Dunn and Sainty, 2019). The members were aware of the adverse effects of such acts
which would be harming the reputation of their profession; still they indulged in such activities
which led to the violation of the principle of professional behavior and consequently, the
company has been penalized, which have led the operations of the company to be ceased.
PART B
The two potential threats which might have contributed in the false representation of the
financial statements and audits are as follows:
Threat of self-interest: The auditors of the Corporate Resource services might have self-interest
as provided in 200.4 of the APES 110. The financial auditors and the former partners of RSSM
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Company have provided misleading audit reports and approved such reports which have acted as
threat of self-interest where the partners had a close relationship and even when the error in the
audit reports have been identified, still no action has been taken (Jaber and Mohammad, 2019).
Bernstein, who was appointed as an engagement quality reviewer had given a false assurance
that the audit reports were being undertaken as per the rules and regulations of the Public
Company Accounting Oversight Board (PCAOB), however, this was not the case and the
company was being non-compliant with the PCAOB (Christ and Burritt, 2016).
Threat of familiarity: 200.7 of the APES 110 provides for the threat of familiarity where a
member of engagement team have a close relation with such a person who is an employee of the
client and is in the position to affect the subject matter of the engagement (Mah, 2018). Rubin
and Bernstein have a close relation where they were in the position to influence the audit reports
and the other subject matter of the engagement. Bernstein has been in a direct relation with
Rubin where they both committed fraud and provided misleading audit reports.
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REFERENCES
1. Martinov-Bennie, N. and Mladenovic, R., 2015. Investigation of the impact of an ethical
framework and an integrated ethics education on accounting students’ ethical sensitivity
and judgment. Journal of Business Ethics, 127(1), pp.189-203.
2. Payne, D.M., Corey, C., Raiborn, C. and Zingoni, M., 2019. An applied code of ethics
model for decision-making in the accounting profession. Management Research Review.
3. Caratti, S., Pinto, D., Scully, G. and Perrin, B., 2018. An analysis of the Tax Practitioners
Board outsourcing exposure draft. Tax Specialist, 21(3), p.106.
4. Dunn, P. and Sainty, B., 2019. Professionalism in accounting: a five-factor model of
ethical decision-making. Social Responsibility Journal.
5. Jaber, R.J. and Mohammad, M.A.F., 2016. Awareness level of professional independence
requirements, through assimilation of fundamental principles of professional ethics, by
Jordanian CPA auditors, in auditing process: Field study. International Journal of
Economics and Finance, 8(9), pp.11-25.
6. CHRIST, K. and BURRITT, R., 2016. Professional accounting bodies: Scoping options
for sustainability. RELEVANCE AND PROFESSIONAL ASSOCIATIONS IN 2026.
7. Mah, S., 2018. Understanding the public and private interest roles of professional
accounting bodies’ disciplinary processes: a review of the Australian experience.
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