Identify the specific circumstances under which auditors are allowed to provide confidential client information to third parties. a. Under rule 301. 01 [ET section 301. 01], “a member in public practice shall not disclose any confidential client information without specific consent of the client. ” Rule 301 goes on to say that the rule does not relieve a member of his professional obligations under rule 202 (which charges an AICPA member who performs auditing to a standard to be set by the Council) and rule 203 (that requires an AICPA member to not express an opinion that a client’s financial data are in compliance).
Rule 301. 01 goes on to say that a member must produce information when under subpoena or summons, and that the rule shall not supersede the law or any government regulation. Also the rule says it shall not preclude a review of a member’s practice. Lastly, rule 301. 01 states that a member shall not “use to their own advantage or disclose any member’s confidential client information that comes to their attention in carrying out those activities.
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At the end of the day rule 301 states that “this prohibition shall not restrict members’ exchange of information in connection with the investigative or disciplinary proceedings described…” Rule 301. 01 [ET section 301. 01] Accordingly, it would seem as if the standard set by the rules of the AICPA is that an auditor is bound to nondisclosure unless there is a judicial proceeding of some sort or they get permission from the client to disclose. 2. What would I do under the following circumstances? a. My friend discloses to me highly confidential “market moving” information regarding soon-to-be announced merger.
i. Well for one, I would let my friend know before he finished that I was not interested in his confidential information. I would remind him that we had an obligation to maintain the confidential information and that the information he was telling me was beyond my scope. I would also try to stop my friend from telling me because it might become extremely difficult to avoid capitalizing on the information and for that reason I would stop him before he ever told me anything. I have long understood that you do not allow temptation to plant a seed, ever.
In this scenario I feel my obligation would be to inform my supervisor or manager in order to control any negative effects of my friend’s decision. b. If my friend tells me he is going to make a “quick” pick because of the information. i. I would feel obligated to alert not only my manager but also his manager. At the end of the day, his actions could cost everyone their job and I am not willing to allow that to happen. I think too that if the Firm did not take appropriate action there is a strong chance that I would possibly alert the SEC about the lack of oversight and control.
3. How do a CPA’s professional responsibilities differ between consulting engagements and audit engagements? a. There are some similarities, broad concepts that cover both the consulting and auditing functions of a CPA’s role as a third party. The differences are that in a consulting engagement you are provide business model consultation and while you are under an obligation to provide services in a professional and appropriate manner, under an auditing engagement you will be certifying financial statements.
Basically under the auditing function the responsibility includes overseeing the consulting decisions and business practices to assure that they practices conform to the standards of the accounting profession. I am one who believes that the consultants and the auditors should operate under the same standard of care and follow the same concepts, while recognizing that the audit function plays a larger more direct role with the public who rely on the information they publish in order to make informed financial decisions.
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