Case- ETHICS

Gloria and Deloria, CPAs, have recently started their public accounting firm and
intend to provide attestation a variety of consulting services for client, which are
all non public. Both Ms. Gloria and Deloria have particular expertise in designing
payroll and other disbursement systems. Ms. Gloria is concerned about whether
any of the following services would impair their audit independence.
A. F0r each 0f the services in the acc0mpanying table provide a
judgement as to whether providing the service would impair attest
independence. In all 12 situations, assume that management has
designated a management-level individual to be responsible for
overseeing the CPA’s services and established appropriate internal
control. Also, assume that the client is privately held and does not
report to the SEC.
B. Now assume that the 12 services are being contemplated for
nonattest client. Which of the services does the code of Ethics for
Professional Accounts prohibit under this assumption?

Situation Service Independence Additional

Description Impaired( Information
Yes,No, Needed for
Indeterminate) Indeterminate
Replies
1 Customize and Indeterminate
implement a
prepackaged
payroll system
2 Manage the Yes
portion of a
client’s local area
network system
related to payroll.
3 Using payroll time No
records approved
by management,
generate
unsigned payroll
checks on a
continuing basis
for the client; the
client signs the
checks.
4 Prepare the Yes
payroll tax return
form and sign it on
behalf of
management.
5 Approve Yes
employee time
cards.
6 Accept Yes
responsibility to
sign checks, but
only in emergency
situations.
7 Monitor employee Indeterminate
time cards and
make changes
when errors are
detected
8 Post No
client=approved
entries to client’s
trial balance.
9 Provide all the No
initial training and
instruction to
client employees
on a newly
implemented
payroll
information and
control system
10 Screen Indeterminate
candidates and
recommend the
most highly
qualified
candidate to
serve as treasurer
for the client.
11 Supervise client Yes
personnel in daily
operation of the
payroll system
12 Present payroll Yes
business risk
considerations to
 the board of
directors on
behalf of
management.

Part I
STATEMENT OF THE PROBLEM
This study focuses about whether any of Gloria and Deloria it sought to answer
the following questions:
a. A judgement as to whether providing the services would impair
independence for attest clients.
b. Nonattest clients

Part II
AREAS OF CONSIDERATION
why is it that the following services was being said to be independence impaired.

According to PHILIPPINE STANDARD ON AUDITING 620(PAS 620).The

auditor has sole responsibility for the audit opinion expressed, and that responsibility
is not reduced by the auditor’s use of the work of an auditor’s expert. Nonetheless, if
the auditor using the work of an auditor’s expert, having followed this PSA, concludes
that the work of that expert is adequate for the auditor’s purposes. It is said to be that
the CPAs, who practiced auditing, should do its services limited to the auditor’s
purposes and duty.

According to The Provision of non-Assurance Services to assurance client, that the

authorizing, executing or consummating a transaction, or otherwise exercising
authority on behalf of the assurance client, or having the authority to do so, determining
which recommendation of the firm should be implemented and reporting, in a
management role, to those charge with governance are the activities that would
generally create Self-interest or self-review threats, and only, the avoidance of the
activity or refusal to perform the assurance engagement would reduce the threats to
an acceptable level.
Part III
CONCLUSION AND RECOMMENDATION
In the light of the findings, we conclude that being contemplated for attest
clients, services must properly render in accordance of the code of ethics for
professional accounts. If not, it will result for an independence impaired. On the
other hand, if it is contemplated for nonattest client any of the services may be
performed.

RECOMMENDATION
We recommend that Miss Gloria and Deloria should follow what being imposed
under the code of ethics for professional accountants to avoid impaired
independent.

PART IV
Answer letter(b) and discuss your answer.
If the client is not an attest client, any of the services may be performed.
Situation Service Independence Additional
Description Impaired( Information
Yes,No, Needed for
Indeterminate) Indeterminate
Replies
1 Customize and Indeterminate Whether
implement a management
prepackaged approves the
payroll system changes
2 Manage the Yes
portion of a
client’s local area
network system
related to payroll.
3 Using payroll time No
records approved
by management,
generate
unsigned payroll
checks on a
continuing basis
for the client; the
client signs the
checks.
4 Prepare the Yes
payroll tax return
form and sign it on
behalf of
management.
5 Approve Yes
employee time
cards.
6 Accept Yes
responsibility to
sign checks, but
only in emergency
situations.
7 Monitor employee Indeterminate Whether
time cards and management
make changes approves the
when errors are changes
detected
8 Post No
client=approved
entries to client’s
trial balance.
9 Provide all the No
initial training and
instruction to
client employees
on a newly
implemented
payroll
information and
control system
10 Screen Indeterminate Whether
candidates and management
recommend the approves the
most highly changes
qualified
candidate to
serve as treasurer
for the client.
11 Supervise client Yes
personnel in daily
operation of the
payroll system
12 Present payroll Yes
business risk
considerations to
the board of
directors on
behalf of
management.
Situation Service Description Independence Additional Explanati0n
Impaired Information
(Yes,No, Needed for
Indeterminate Indeterminate
Replies
1 Customize and Indeterminate Whether
implement a management
prepackaged payroll approves the
system changes
2 Manage the portion of a Yes Authorizing,
client’s local area executing or
network system related consummating a
to payroll. transaction,
otherwise
exercising
authority on behalf
of client authority
3 Using payroll time No
records approved by
management,
generate unsigned
payroll checks on a
continuing basis for
the client; the client
signs the checks.
4 Prepare the payroll Yes . Preparation of
tax return form and corporate tax
sign it on behalf of return is
management. allowed out the
work must be
approved in
advance by the
clients board of
directors.
5 Approve employee Yes
time cards.
6 Accept responsibility to Yes
sign checks, but only
in emergency
situations.
7 Monitor employee time Indeterminate Whether
cards and make management
changes when errors approves the
are detected changes
8 Post client=approved No
entries to client’s trial
balance.
9 Provide all the initial No
training and instruction
to client employees on
a newly implemented
 payroll information and
control system
10 Screen candidates Indeterminate Whether
and recommend the management
most highly qualified approves the
candidate to serve as changes
treasurer for the client.
11 Supervise client Yes Supervising
personnel in daily client employees
operation of the payroll in the
system performance of
their normal
recurring
activities
12 Present payroll Yes Reporting to the
business risk board of
considerations to the directors on
board of directors on behalf of
behalf of management. management