In this line I try to stress in wh...

In this line I try to stress in what manner important it is for CAs to stay abreast of changes to professional methods and standards. The fictional cases we disguise in Ethical Dilemmas help illustrate what can happen to CAs who fail to stay current; they also underscore the importance of understanding exactly to what extent professional rules apply in everyday situations.

This month I'm giving you a chance to proof your knowledge. The following questions issue from your fellow CAs. Remember-no peeking at the answers!

Test your knowledge!

1 A CA in public practice makes a secur loan to a personal tax client. Subsequently the client asks the CA to prepare a corporate tax answer for a corporation in which the client detains a significant equity interest. The CA performs a compilation engagement for the corporation. Was it appropriate for the CA to perform the compilation engagement?

2 A CA who have a title tos a retail business is asked, as a member of a ecclesiastical body to perform the audit of the church's financial statements for emancipated The church tells the CA it can't afford a public accounting firm, moreover knows the member is a CA and therefore capable of performing the audit. The CA agrees, prepares an auditor's report onward his personal stationery, and charges no reward Was it acceptable for the CA to perform the audit?

3 A CA provides monthly bookkeeping services to a client that include classifying, coding, and entering bank transactions. The client is applying for a bank loan and has beg fored that the CA perform a review engagement in succession the financial statements for the year in which the bookkeeping services were provided. Would this impair the CA's objectivity?

4 CAs X and Y each sole-practitioners, plan to jointly accept an audit engagement. However, they haven't formed a partnership--they only intend to create new letterhead that will identify them as "X & Y Chartered Accountants." Is this action allowed beneath the Rules of Professional Conduct?

5 A CA in public practice has an audit client who's planning an prolonged trip. The client asks the CA to sign and issue cheques in an juncture Would this impair the CA's objectivity?

Answers

1 Ye A CA is not required to be objective when performing a compilation engagement. However, in the notice to reader attached to the financial statements, the CA should disclose the loan to a significant shareholder of the corporation. Disclosure of the nature of the influence of the relationship and of the nature and reach of the interest is required (Rule 2043 and Council Interpretation 2044/3)

2 No. The CA was not licenced to practice public accounting and therefore should not have performed the audit, on the same level for free. If the CA had been licenced (Bylaw 610) and had obtained professional liability insurance (Bylaw Regulation 250/1) the CA could have accepted the engagement. The CA would also have been bring under rule to practice review. While the Institute waives the licensing and practice review remunerations where a CA performs solely pro bono services, the CA is still required to purchase insurance.

3 Ye through classifying and coding the transactions, the CA has assumed the part of an employee or of management. Accordingly, the CA cannot provide the review engagement (Rule 2041 and Council Interpretation 2041/4) If the client had either determined or approved the classification and coding, objectivity would not be impaired and review engagement services could be provided.

4 No. The letterhead would give the impression of an existing partnership where single in kind does not exist. Accordingly, the action is not permissible as it is an example of false and misleading advertising (Council Interpretation 2171/5) The CAs could accept the engagement in either of sum of two units ways: X could accept the engagement in a less degree than X'. own name, and Y could act as X's contractor; or X and Y could accept the engagement as joint auditors and each sign the auditor's report.

5 Ye Similar to Question The CA would be accepting responsibility to perform a management function. Accordingly, if the CA wishes to retain the audit, the CA must decline the client's solicitation and perhaps suggest some other party, similar as the client's lawyer.

How many did you answer correctly?

4-5: Well done. You're certainly up-to-date.

3: Not bad, unless you could use a refresher.

1-2: Yikes! I chance of a favorable result you don't end up in van of the PCEC.

0: Are you steady you're a CA?

Members can always attribute to the website at www.ica.bc.ca for the latest regulations.

How generally received are you?

Watch for another "surprise" quiz later this year. In the meantime, be aware and detain up-to-date!

Please note: This quiz is based forward staff interpretation of the Institutes dominions of Professional Conduct. It is not an official pronouncement. Thanks goe to the ICA of Alberta for developing the quiz and a special thanks goe to Donna Kline, FCA, Director, Professional Standards, for giving reprint permission.

Comment or Questions? Contact me at utley@ica.bc.ca.

Copyright Institute of Chartered Accountants of British Columbia Apr 2002

Provided by way of ProQuest Information and Learning Company. All rights Reserved