Ethics Final (8-14)

Undue Influence Threat

Attempts to coerce or otherwise influence the CPA member (e.g., significant gifts or threats to replace the auditor over an accounting principles disagreement).

quid pro quo harassment

"this for that" uses coercion to gain sexual favors in return for a wok-related benefit such as a promotion or pay raise

Common Discreditable Acts

- Violating Antidiscrimination Rules - Failing to Fulfill Personal Tax Responsibilities - False Financial Reporting - Misrepresenting Qualifications to Attract Clients - Failing to Return Client Records - Improper Disclosure of Confidential Client Information

Accounting Principles Rule

- designates GAAP - the statements of interpretations of: FASB, GASB, FASAB

Key positions

CEO, CFO, Controller, General Counsel, company director

Adverse Interest Threat

CPAs acting in opposition to clients (e.g., through litigation).

Familiarity Threat

CPAs having a close or longstanding relationship with a client

Management Participation Threat

CPAs taking on the role of client management or otherwise performing management functions

Claw Back Provision

grabs back undeserved executive profits

moral seduction

gradual process of accepting the perspective of those with whom they regularly intact

Requirements to provide nonattest services to audit clients

- CPA firm does not make managerial decisions - Client can supervise and evaluate nonattest services - Client accepts full responsibility - Both parties document in writing the nature and scope of services provided

Mandatory Code of Conduct must promote

- Honest behavior - Ethical conduct re: conflicts of interest - Full, fair, accurate, timely, and understandable financial disclosures - Compliance with all rules and regs - Timely reporting of violations - Timely disclosures of waivers

Record retention policy

- Multi-year documents (perm file) - forever - Most other documents - 7 years

The disclosure of organizational misconduct to authorities

- Organizational misconduct - Types of misconduct - Illegal acts - Unethical acts Authorities Police, regulations, congressional regulators, social media

Whistleblowing in Tax Practice

- Preparers may not disclose client information - criminal charges - Reward from 10% - 30% for tips

Responsibilities of an Audit Committee

- Supervising a company's independent auditor - Review all SEC filings - Meet with internal and outside auditors - Monitor financial reporting risks

Integrity and Objectivity Rule

Accountants shall maintain objectivity and integrity and shall be free of conflicts of interest

Actual conflict vs. Apparent conflict

A reasonable person would think the professional's judgment is likely to be compromised

Confidential Client Information Rule

An accountant in public practice shall not disclose any confidential client info without the specific consent of the client.

Specific Disclosure

Detailed about relevant threats and safeguards to allow a client to make an informed decision about whether to give its consent

Specific Issues of Confidentiality

Existence of client relationship Using client information for personal gain

Indirect Interest

Exists when a covered member owns a stake in another entity but does not control or influence the entity's investment decisions.

Duties Concerning Nonfactual Presentations

Financial forecasts - conditions that are likely to exist Financial projections - hypothetical action that might occur

Duty to possess sound moral character

Honesty, integrity, attention to duty, forthrightness, and self-restraint that enables a person to discharge the duties of the accounting profession fully and faithfully

IRS Whistleblower Program

IRS pays rewards for detecting and bringing to trial and punishment persons guilt of violating the internal revenue laws - Awards are granted on cases that involve over $2 million in potential recoveries - All informants can receive a reward, even if they were complicit in the act

Material Indirect Interest

Impair independence if a covered members owns this

Dodd-Frank Whistleblower Program

Informants have to submit information relating to a securities law violation upon financial results are incorporated into a U.S. company's consolidated statements. - Awards based on the significance of information received and granted on cases that involve over $1 million in potential recoveries - Reported information must be original information

Hotlines

Mandatory under SOX for public companies to maintain a hotline - No protection for identities of nonemployees such as customers who submit complaints

Duty to Disregard GAAP Rules

Must demonstrate that due to unusual circumstances the financial statements or data would otherwise have been misleading

Failure to follow rules of governmental regulatory bodies

Must follow specialized mandates of a governmental body

False financial reporting

Never direct or allow someone else to sign a materially false document

Self Review Threat

Occurs when a CPA reviews evidence during an attest engagement that is based on her own or her firm's nonattest work.

A partner at a regional CPA firm performed under the stage name Debit Diva in the pornographic movie Debit Does Dallas. A well-known website discovered and disclosed her activities. Did this CPA commit an act that is "discreditable to the profession" under the Code of Conduct?

Probably not. Some would consider this CPA's actions to be inappropriate, demeaning, or worse. Nonetheless, her behavior was legal. Moreover, it would be problematic for a professional organization to discipline someone for exercising her free speech rights outside the workplace.

Current conflict - Future conflict

Reasonably foreseeable

Internal Whistleblowers

Report misconduct to authorities within their company or organization - Under AICPA, IMA, and IFAC: whistleblowing outside the organization is considered a violation of confidentiality unless the actions are clearly illegal

General Disclosure

States it is common for an accountant to serve numerous clients Made without referencing any anticipated or pending COI

Implicit Consent

Surrounding circumstances reasonably lead a disinterested person to conclude that a client understands an accountant's COI, the client is considered to have given consent

A few months ago, your accounting client discussed his confidential business expansion plans with you. If you receive a subpoena compelling you to testify in state court about this client conversation, are you required to testify?

The answer depends on whether your state has enacted an accountant-client privilege statute. The duty of confidentiality does not prevent you from being compelled to testify in court. However, if a state accountant-client privilege exists, you do not have to disclose confidential client communications in a state court proceeding.

Self Interest Threat

The threat that a member could benefit, financially or otherwise, from an interest in, or relationship with, a client or persons associated with the client.

Conflicts of interest

When a person can be tempted to subordinate duties owed to others in exchange for personal gain

Cognitive Overload

When people have so much analytical info occupying their minds that their calculating brain function becomes too clogged up.

Your client owns a restaurant franchise and operates as a sole proprietorship. Several months ago, your client filed a lawsuit in which she claimed that the franchisor's failure to provide adequate regional advertising caused a large drop in her profits. In response, the attorney representing the franchisor has demanded to see your client's three most recent annual income tax returns. Does your client probably have to provide these tax returns?

Yes. When business owners sue for lost profits, their historical earnings, as reported on past tax returns, are highly relevant.

Qui Tam Provision

a private citizen can sue on behalf of the government without the involvement or approval of the govt

Confirmation bias

a tendency to search for information that supports our preconceptions and to ignore or distort contradictory evidence

Dual Client Conflict

arises when an accountant contemplates representing both a seller and buyer... Must be 2 clients present

Pre-textual retaliation laws

action against a whistleblower on the basis of a fake reason

Actual Consent

agreement to allow something to happen

Cooperation preference

conflict avoidance

Nondisclosure agreements

cannot be used against a whistleblower employee

Accountant Client Conflict

classic conflict of interest facing accountants and other advisers arises when professionals' personal goals diverge from their clients obligations

Acts Discreditable

forbids accountants from committing acts that discredit the profession of accounting

External Whistleblowing

disclosed to an outside authority - The need for more extensive proof of the claim

PCAOB

dominant standard-setter in charge of setting public-company auditing rules - Establish audit standards and ethics rules for public companies - Register, Inspect, Discipline CPA firms

Attorney-client privilege

expansive in scope and applies in all state and federal matters

Partner Rotation

lead partner and concurring partner must relinquish their roles every 5 years

Outside auditors

may not inform the government or the public about misconduct; precluded by obligation of confidentiality - To prevent substantial injury to the financial interests of the entity or its investors - Belief that an entity is about to impede an investigation Ex. destroying documents - No action on an SEC complaint for more than 120 days; whistleblower submitted info internally 120 days ago

Reportable Events

occurrences that potentially provide insights into a firm's competence

Anti-retaliation laws

outlaws "discharge, demote, suspend, threaten, harass, or discriminate" against employees

Moral Licensing

people who have performed a good deed feel entitled to engage in a a bad deed

Hostile work environment harassment

repeated, offensive comments about gender or sexual orientation seriously impair employees from performing workplace duties

Advocacy Threat

represents a client's interest, e.g. bias. Promoting a client's interest. (confirmation bias)

Accountant-Client Privilege

state law concept that is related to the duty of confidentiality

Inside auditors

the employer has an expectation of confidentiality from employees - Misconduct must involve a securities related matter

self-serving bias

the tendency for people to take personal credit for success but blame failure on external factors

Direct Interest (Impairs Independence)

when a covered member owns even one share of stock in a client

False Claims Act

whistleblowers are entitled to a percentage of the money recovered from wrongdoers who cheat the federal government

In Fact

Actual commitment to objectivity and professional skepticism

Form of Organization and Name Rule

a CPA firm's name must not be deceptive or misleading

Duties of Tax practice

- A tax practitioner misappropriated a client's tax refund check or deposited it into the accountant's own bank account - A tax Practitioner Charged Excessive, or unconscionable, fee for representing clients in connection with tax disputes - A tax practitioner committed a tax-related criminal offense or an offense involving dishonesty or breach of trust - A tax practitioner knowingly gave false or misleading information connection with a federal tax matter - A tax practitioner refused to return client-prepared records that a client needed to comply with its tax reporting obligation, even if the client owed unpaid accounting fees - A tax practitioner attempted to influence IRS employees through intimidation or by offering inducements - A tax practitioner used abusive language or other contemptuous conduct in connection with practice before the IRS - A tax practitioner engaged in a pattern of providing false or incompetent opinions in federal tax law matters

Independence rules applies to covered members

- Certified accountants who work on the audit or a concurring partner - Partners or senior staff who provide 10 hours or more of non attest services to the attested client - All partners in the same office as the engagement partner

Required disclosure with or without consent

- Comply with legal subpoena - Peer review - Compliance with standards

Who is a client?

- Current clients: Any person or entity for whom an accountant presently performs professional services - Prospective or past clients

Failure to comply with personal tax requirements

- Do not file personal tax returns on time - Accounting firm does not file its tax returns on time - Collect taxes on behalf of others, such as payroll taxes, but do not remit these funds to the tax authorities

Ethics of Full Disclosure

- Duty to present material facts - Duty to not obscure important information - Duty to place facts in context - Duty to apply GAAP - Duty to Disregard GAAP Rules - Other Comprehensive Bases of Accounting (OCBOA) - Duties Concerning Nonfactual Presentations

Under Code of Professional Conduct

- Failure to comply with anti-discrimation rules - race, color, religion, sex, or national origin - Sexual Harassment - Failure to comply with personal tax requirements - False financial reporting - Failure to follow rules of governmental regulatory bodies - Improper limitations on malpractice liabilities - Misrepresenting professional qualifications and experience - Improper disclosure of CPA Exam questions - Failure to protect client confidentiality

Four Principal rules concerning record retention

- Failure to return client records upon request - Failure to return accountant-prepared records (bookkeeping entries), unless the client has not paid outstanding fees owed - Failure to return work product (final doc), unless the client has not paid outstanding fees owed - Accountants do not have to provide working papers (accountant's own thought process and analysis) to a client

Other Comprehensive Bases of Accounting (OCBOA)

- Financial statements that reflect the cash receipts and disbursements basis of accounting that applies cash basis accounting for some items but accrual accounting for other items - Financial statements that apply tax accounting rules - Financial statements that conform to requirements imposed by a gov't regulatory agency

Noncovered members (who doesn't have to comply with independence rules)

- Generally exempt Unless the professional, combined with two or more immediate family members, own more than 5% of the client's stock - The accounting professional is simultaneously employed by an attest client in a position capable of influencing the financial reporting

Discretionary disclosure without consent

- Sale of an accounting practice - Litigation related

Advertising and other forms of solicitation rule

Accountants should never provide unrealistic fee estimates or exaggerate likelihoods of a favorable result or being able to influence government officials

You prepare accounting compilations for the owner of a gas station. In performing your duties, you noticed that customers are charged for a full gallon of gas at several gas pumps, even though the pumps only dispense 9/10ths of a gallon. You have told the owner about this issue, but he refuses to correct this deceptive practice. You want to initiate a whistleblower claim, but you cannot locate an appropriate federal agency that is willing to review your claim. What steps should you pursue?

Becoming an external whistleblower often requires substantial effort and persistence. First, you have to identify the appropriate government agency that is responsible for evaluating this type of claim. Contracts for the sale of goods and services typically are regulated at the state or county level. This explains why you could not find any federal agencies willing to investigate your claim. Then, you have to identify the appropriate person within that agency who handles consumer or whistleblower complaints. Invariably, that person will request documentary evidence, so you should be prepared to substantiate your claim. In short, concerned employees often must overcome challenging obstacles to become a whistleblower.

Improper limitations on malpractice liabilities

Indemnification agreements - Shield an accountant from potential liability

In Appearance

Informed observer would not doubt commitment to objectivity and professional skepticism

Disclosure of Information

Internal - in between you and coworkers External - outside of work Client

Close relatives - Parents, siblings, and self-supporting children

Investment is treated as unrelated unless - It is material in value to the relative - If the relative has significant influence over the client's corporate governance

Immediate family - Spouse, spousal equivalent, dependent child, and other dependents

Investment treated as if owned by covered member

During the course of preparing a publicly traded corporation's tax return and auditing its financial statements, you discovered that your client gave illegal donations to political candidates last year. Upon further investigation, you discovered that your client then disguised these disbursements as Miscellaneous Marketing Expenses and improperly claimed these nondeductible expenditures as tax write-offs. When should you disclose these illegal expenditures to the IRS and SEC?

Never. Tax return preparers and external auditors have a general duty to keep client information confidential. However, you can express your disapproval of this illegal conduct by ending your professional relationship with this client.

The senior manager on a Texas audit engagement emailed highly sensitive client information to the lead engagement partner in Ohio, who was in charge of reviewing client internal control flowcharts. The partner printed this email on paper and then threw it in her trash can. That evening, a member of the night cleaning crew read this email and shared its contents with her husband, who happened to work as an executive at the client's main competitor. Did the senior manager or the partner violate the duty of confidentiality?

No and yes. The senior manager did not violate the duty of confidentiality by sending an internal email because sharing information with a colleague generally is permitted. However, the lead audit engagement violated the duty of confidentiality by failing to take adequate precautions to protect the client's privacy.

Allan and Erica are senior accounting professionals at a CPA firm, but they are not covered members with regard to the firm's audit client, Powpatic Corporation. Allan owns 7% of Powpatic's stock, and Erica serves once a month on Powpatic's Board of Directors. Does their CPA firm satisfy the Independence Rule to audit Powpatic Corporation?

No. A CPA firm does not satisfy the Independence Rule if a noncovered member owns more than 5% of an audit client's outstanding equity. Thus, Allan's 7% ownership interest in this client's stock prevents the CPA firm from satisfying the Independence Rule. Also, a CPA firm does not satisfy the Independence Rule if a noncovered member works for the CPA firm and simultaneously works for an audit client. Therefore, even if Allan did not own any client stock, Erica's activities as a client director would have prevented the CPA firm from satisfying the Independence Rule

When Dalbeck recently retired from the Strong CPA firm, he sold his partnership interest back to the firm for a lump-sum cash payment. He is well known in the business community, so the firm decided to keep his name on its office door "out of respect." Dalbeck now has agreed to serve on the Audit Committee of one of his longstanding CPA firm clients, Vextron Corporation, to "break the monotony of retirement." Does the Strong CPA firm satisfy the Independence Rule to continue as Vextron's auditor?

No. A CPA firm loses its independence when a former partner or employee leaves to accept a key position with a client, unless the departed firm member ends all participation, and appearances of participation, in the CPA firm. In this situation, Dalbeck is working in a key position that involves the content of Vextron's financial statements. Furthermore, the Strong CPA firm's continued use of Dalbeck's name creates the appearance of Dalbeck still having ongoing firm participation

Your mother is a marketing executive who oversees her employer's entire sales team in Europe. Your mother has suggested that you should expand your accounting practice by bidding to audit her employer's financial statements. Does your mother's employment prevent you from satisfying the Independence Rule to serve as this company's auditor?

No. A family member's employment with a client generally impairs an auditor's independence only if the family member holds a key position. A job is considered to be a key position only if it involves the processing, presentation, or content of financial statements. Thus, your mother's prominent role as a marketing executive does not impair your independence.

An accountant who specializes in representing individuals accused of tax fraud recently was retained by a former state governor to provide professional services. This accountant would like to mention on her website that this former governor is a client because his prominence will boost her reputation. May she disclose her professional relationship with this former governor?

No. Although an accountant usually may disclose the name of a client, disclosure in this situation might lead the general public to infer that the former governor retained this accountant to defend him against claims of tax fraud. To avoid embarrassing this client, his name should not be disclosed without his consent.

At year-end, you noticed that your audit client should have accrued several liabilities. To assist your client, you emailed the CFO an illustrative adjusting entry and proposed that the client record similar adjusting entries in its accounting system. Did you violate the Independence Rule?

No. Although auditors generally should not initiate bookkeeping entries for their clients, accountants during the course of an audit may propose bookkeeping modifications to ensure that completed financial statements conform to generally accepted accounting principles. Independence is preserved as long as the client makes or approves the resulting entries.

During the course of serving as the business manager for a famous singer, a CPA learned that the singer killed a pregnant mother during a car accident. The singer had gotten drunk at a club and fled the scene of the accident to avoid detection. This singer recently died. May this CPA now tell his friends about the car incident?

No. An accountant may never disclose confidential client information. Even though the singer no longer is alive, disclosure of his criminal misconduct still might cause harm. For instance, disclosure might embarrass the singer's family or impede his estate from profitably licensing his songs for use in ads or other commercial ventures.

Your company's Code of Conduct requires "all managers to report claimed accounting violations to their immediate supervisor or the company's CFO. Disclosures outside the company are permitted only if the company does not adequately address your concerns within 60 days." As a manager in your company's bookkeeping department, you noticed that the company delayed recording expenses at year-end to boost last year's reported profits. Do you risk losing your job if you inform the SEC immediately?

No. An employer cannot use employment agreements or confidentiality rules to intimidate an employee from disclosing fraudulent accounting practices to the SEC.

The Audit Committee of a large charitable organization has asked you to investigate whether one of its high-ranking executives is embezzling funds. During the course of your investigation, the CEO asked you for an update on the preliminary results of your investigation. You have not found any direct evidence that the CEO is involved in embezzlement, but some evidence suggests that her son, the charity's CFO, is involved in wrongdoing. Should you disclose your tentative results to the CEO?

No. By sharing your tentative results with high-ranking executives or their allies, you might jeopardize the success of your investigation. You should obtain specific consent from the charity's Board of Directors or Audit Committee before sharing information with anyone.

In a recent property tax hearing, county officials claimed that your client misallocated the aggregate price in a real estate deal between the acquired building and the underlying land. In response, you wrote a letter in which you defended the accuracy of your client's cost apportionment. Do you still satisfy the Independence Rule to audit this client?

No. By writing this letter, you created an advocacy threat that impaired your independence.

CPA is the Controller of a small corporation that supplies replacement parts for military equipment. She recently posted an online advertisement seeking to hire a staff accountant to work during a late-evening shift at company headquarters. The ad states that the "ideal candidate will be a college graduate, with military experience, age 25 and up, who shares the core values of the President of the United States." Based on federal antidiscrimination laws, did this CPA commit a discreditable act?

No. Federal antidiscrimination laws do not prohibit discrimination against non-college graduates, applicants who lack military service, individuals under age 40, or people who hold certain political beliefs.

The IRS has accused your tax accounting client of fraudulently omitting 30% of his income from his tax return last year. Your client recently told you he regrets lying on his tax return, but he was desperately short of money. The IRS has obtained a subpoena to compel you to reveal that your client confessed to filing a false tax return. Does the federal tax law's accountant-client privilege protect you from having to disclose this communication?

No. Tax fraud is a crime, and the federal tax law's accountant-client privilege does not shield communications concerning criminal misconduct.

A CPA firm conducts an annual Banking Hot Topics Update meeting in which it discusses recent accounting rules changes that affect financial institutions. Both existing and prospective clients are invited, and the CPA firm provides free meals and materials to all participants. The participants pay their own airfare and lodging costs. Did the CPA firm violate the Independence Rule?

No. The CPA firm held the meeting in a public forum and provided items of modest value to the participants for educational purposes. Thus, the hospitality extended by the CPA firm was reasonable under the circumstances.

Staff writers for the popular 1990s television show Friends frequently used vulgar language and made sexual gestures while discussing ideas for upcoming episodes. A production assistant filed a lawsuit in which she claimed that the coarse language and gestures created a hostile work environment. Did it?

No. The California Supreme Court unanimously held that the writers did not create a hostile work environment. They merely were engaged in the creative writing process.

An employee of a large, publicly traded hospital chain recently demanded a kickback from a medical equipment manufacturer in return for continuing to purchase from this supplier. The supplier was outraged by this request and wrote a detailed report of this incident to the hospital's Ethics Compliance Officer. The supplier expressly requested that its identity not be disclosed. Will the hospital violate the Sarbanes-Oxley Act if it discloses the name of this supplier?

No. The Sarbanes-Oxley law only protects the identities of employee whistleblowers. It does not protect the identities of customers, suppliers, or other outsiders.

Your employer's CEO has made it clear to all accounting personnel that top company executives will receive a $200,000 bonus if the company's reported Earnings per Share exceeds $10. As the cost accountant in charge of production operations, you are not sure if a payment made to the Vice President of New Product Sales should be capitalized as an inventory cost or expensed as a period cost. The payment equals less than 1% of the company's sales and less than 1% of the company's manufacturing costs. Also, it changes the company's Earnings per Share by only two cents, from $9.99 to $10.01. The CFO told that you should stop "wasting time" and just "capitalize it like all other product-related outlays." Do you agree?

No. The accounting treatment of this item is material because it alters whether executives receive incentive-based compensation. You have a professional duty to ensure that this item is accounted for correctly.

After discovering last week that your client Memnostadic Corporation was engaged in unscrupulous tax avoidance strategies, you terminated your professional relationship. Yesterday, the Managing Tax Partner of another accounting firm called to inform you that she plans to accept Memnostadic as a new tax consulting client, but she wanted to know why you ended your professional relationship with this company. During the call, she reminded you that "it is your professional duty to forthrightly respond to a successor CPA firm's inquiry," and she agreed in writing to keep your discussion confidential. Should you disclose the reasons that you ended your professional relationship with Memnostadic?

No. The caller's statement of your ethical duties was incorrect. An accountant generally does not have a duty to answer questions posed by a successor firm unless the former client consents to disclosure. There is a practical solution to this dilemma. You should advise the successor CPA firm to obtain Memnostadic's written consent for you to discuss this matter. If Memnostadic refuses to give its consent, the successor CPA firm reasonably can infer that Memnostadic previously was engaged in inappropriate or illegal conduct.

Marco, an employee at a nonprofit day care organization claims that he was laid off from work because his "superior talent and diligence made others look bad," such as Susan, his "lazy supervisor." Feeling dejected, Marco posted an online review about this charity, which stated that "Susan physically abused several of the children, much like Susan herself must have been abused as a child." This statement was false, but the organization asked Susan to resign because her continued employment was destroying the organization's fund-raising efforts and "scaring away" concerned parents. Marco contends that his posting is protected by the right of free speech and whistle- blower laws. Is he correct?

No. The right of free speech does not protect intentional misstatements that defame a person's character. When a person maliciously makes false statements, including in a whistleblower complaint, he is liable for all damages caused by his intentional misconduct.

An auditor's husband is recovering from emergency surgery after suffering a heart attack. A longstanding audit client sent a $70 vase of flowers and a Get Well card to her home. Did this gift compromise the auditor's independence?

No. This gift did not create an undue influence threat. This gift displayed respectful and considerate support for a colleague who was facing a severe emotional challenge. Under the circumstances, the value of this gift was "clearly insignificant."

For many years, you negotiated settlements on behalf of Louisiana Shrimp, a seafood importer, when its employees submitted claims for work-related injuries. During the course of working in Louisiana Shrimp's Human Resource Claims Department, you learned its techniques for detecting exaggerated injury claims and minimizing payouts.

No. This situation presents a Dual-Client Conflict because this new client and Louisiana Shrimp, a past employer, have adversarial interests. Representation of this new client invariably would involve the use of techniques and information that your former employer shared with you in confidence.

A tax accountant's website accurately mentions that she was an "IRS Revenue Agent for seven years" and has "substantial tax experience for solving business tax problems." Do these statements violate the Code of Conduct?

No. This statement is accurate and factual. This statement does not imply that the accountant can improperly influence past colleagues or the IRS.

While working as an internal auditor for a large company, you noticed that several marketing executives were paying bribes to foreign government officials to obtain long-term government construction contracts. To make matters worse, the company's accounting staff capitalized these costs into the construction projects under the label Miscellaneous Expenditures. Therefore, the company effectively hid these costs on its financial statements. Also, by incorporating these expenditures into its construction costs, the company effectively will expense these bribery expenditures for tax purposes even though bribes and other illegal payments are not allowable tax deductions. If you file whistleblower claims with the SEC and your submission results in it collecting large penalties, will you likely receive a monetary reward?

No. Under the Dodd-Frank Whistleblower Program, internal auditors and others whose jobs involve securities law compliance generally do not qualify for rewards if they discover wrong- ful conduct.

A former client has demanded that you "turn over everything immediately" relating to a client engagement that ended seven months ago. The client still owes you 40% of the total fees billed. Do you have a duty to "turn over everything"?

No. Until all outstanding fees have been paid, your only duty is to return client-prepared documents.

A client has accused its auditor of fraudulently overcharging it for professional services. The auditor disputes this claim and has announced its plan to sue this client to collect unpaid fees. The auditor has already commenced fieldwork for the current-year audit, and the client's reporting deadline is imminent. May the auditor complete its fieldwork and issue an audit opinion?

No. When litigation between an auditor and a client has commenced or been threatened, the adverse interest threat impairs the auditor's independence. It is irrelevant that audit fieldwork has begun or that a filing deadline is imminent.

Your college friend Ashish remains upset that you never repaid a loan he had given you two years ago. Nonetheless, when a successful company hired Ashish as its Chief Financial Officer, he recommended that the company hire you as its auditor. Prior to becoming the company's auditor, you informed the company's Board of Directors that you were beholden to Ashish to repay a debt to him, but you promised that the resulting conflict of interest would not impair your objectivity. The Board of Directors unanimously approved and transmitted to you a signed Waiver and Consent to Conflict of Interest authorization. May you serve as the company's auditor?

No. You have a duty to the public to vigorously audit this company and avoid all appear- ances of a conflict of interest. In this situation, your unpaid debt would make reasonable members of the investing public question whether you are unduly beholden to Ashish, your long-standing friend. Because this divergence of interests involves the public interest, your client's attempted consent to your conflict of interest has no effect.

A multioffice CPA firm audits Stakeout Company annually. This client's headquarters is in Grand Island, Nebraska, and the lead audit partner on the engagement is located in the CPA firm's headquarters office in Omaha, Nebraska. Each of the following individuals works at this CPA firm and owns substantial stock in Stakeout Company: An office receptionist who works in the Omaha office A tax partner in the Omaha office who consulted for seven hours on a single tax project for this Nebraska client A partner who primarily works in the Florida office of this firm, does not provide any services to this Nebraska client, and is not involved in any firm compensation or promotion decisions Which of these individuals, if any, is a covered member regarding this Nebraska client?

None are covered members. Individuals generally are not considered to be covered members if they perform administrative tasks, perform only a minor number of hours of nonattest services for an audit client, or do not work in the same office as the lead audit partner on an engagement.

You work as a department head in the Information Systems Department of a large bank. You employer's Code of Conduct requires key Information Systems employees to report "suspicious activity" to the company's Internal Auditing Group. Last week, one of your colleagues took several lunch breaks that lasted over three hours. Today, he arrived for work driving a new luxury car that a person earning his salary was highly unlikely to be able to afford. Do you have a duty to report your colleague's activities to the Internal Auditing Group?

Probably not. There are many innocent explanations for why your colleague took long lunch breaks, such as going to medical appointments. Also, there are many innocent reasons why a person with a modest income might drive a seemingly unaffordable luxury car. For example, he may have received an inheritance or his spouse might have a high income. This company should clarify the scope of its policy and not create an environment in which employees feel compelled to monitor colleagues' private activities.

For several years, a CPA has been the lead partner on an audit engagement for Architection, a large construction corporation. She is an accomplished auditor with an impeccable reputation for candor and professionalism. While attending architecture school, her son received seven job offers on graduation from architecture school, including an offer to work as a junior trainee at Architection. He does not plan to accept Architection's employment offer, but the offer remains open. Does this CPA satisfy the Independence Rule to audit Architection?

Probably yes. The CPA's impeccable record suggests that she approaches her responsibilities with a professional attitude of objectivity and skepticism. Furthermore, her gratitude to Architection for offering her son employment probably would not lead a reasonable observer to doubt her continuing impartiality. Thus, on balance, she likely is independent in fact and in appearance.

Information Overload

When people receive so much data that they procrastinate or never make a decision. "Less is more" applies to accounting information as well

Some employers compensate their employees by, in part, giving them company stock or stock options instead of cash. Under GAAP, a corporation is required to record the value of stock-based employee compensation as an expense. However, some companies believe that their shareholders would benefit from understanding how this noncash expense affects reported profits. May a corporation supplement its GAAP-based statements by showing a non-GAAP measure called Adjusted Earnings, Net of Options-related Compensation Expense?

Yes, as long the company prominently displays its GAAP earnings, the traditional GAAP earnings measure is reconciled to the non-GAAP measure, and the resulting presentation is not misleading. The likely format of this reconciliation would start with Net Income, per GAAP. Then, Options-related Compensation Expense would be neutralized, or added back, to reflect Adjusted Earnings.

Due to their inability to conceive a child, a married couple utilized an embryo implant procedure and hired a surrogate mother to provide gestation. The husband, the wife, and the surrogate mother all have asked you to determine the fair amount of a weekly stipend that the married couple should provide to the surrogate mother during the term of the pregnancy. The parties have provided you with information concerning the surrogate mother's expected discomfort, customary living expenses, and historical wages. Can you accept this engagement?

Yes, if you obtain the informed consent of all three parties. A Dual-Client Conflict exists because the married couple and the surrogate mother have opposing financial interests. However, if you believe that you can perform this task impartially and all affected parties give their informed consent, you may accept this assignment.

Jones, a CPA, and Swenrood, a non-CPA Enrolled Agent, conduct business under the name Jones and Associates. Jones owns 80% of the firm, and Swenrood owns the other 20%. Does this name violate the Code of Conduct?

Yes. A CPA firm generally may have a non-CPA as an owner. However, the name Jones and Associates implies that the firm has at least two associates. Because Jones only has one colleague, this name is deceptive and misleading

A county mental health facility has a unionized workforce. One union represents nurses, and the other union represents social workers who counsel patients. Both unions have asked you to analyze the county facility's operating results and assist these unions in bargaining for pay increases. At the outset of your accountant-client relationship, members of both unions shared the common goal of maximizing their pay raises. However, it now has become clear to you that, if you successfully negotiate large pay raises for the nurses, the social workers likely will suffer job layoffs. Does the Code of Conduct require you to pursue any actions?

Yes. A Dual-Client Conflict has arisen because you cannot aggressively pursue the nurses' goals without adversely affecting the social workers' best interests. You should discuss this conflict of interest with your clients and, if requested, withdraw from representing one of these two client organizations.

You work as a staff accountant in a publicly traded construction company. Your employer takes pride in its reputation for integrity in all business dealings, and it has strict policies that require all personnel to adhere to SEC and GAAP rules. To align employee incentives with company goals, all professional and staff employees are granted company stock options. As a construction company, your employer utilizes percentage-of-completion accounting for revenues. This method relies on various estimates concerning the degree to which a project is complete and the degree to which actual cost results will conform to budgeted cost projections. If you deliberately lower certain cost estimates in the company's upcoming quarterly report, the company's stock price likely will rise over the short run, earning you and your colleagues a substantial profit on your stock options. Do you have a conflict of interest under the Code of Conduct?

Yes. Accountants have a duty to objectively perform their job duties, even if doing so impedes their personal goals. Your employer is committed to ethically complying with generally accepted accounting principles, and you may not subordinate your professional obligations to your personal aspirations.

During the course of auditing a major theme park, you discovered that your client is planning to build a new parking structure on the northwest corner of the park. You anticipate that a restaurant chain will want to locate near this new parking structure to take advantage of the expected boost in tourists visiting that area. In the hope of earning a substantial profit, you purchased land next to this planned parking structure. Your client had no plans to purchase this land for itself, and you did not disclose this information to anyone else. Did you violate the duty of confidentiality?

Yes. An accountant is not entitled to use confidential client information for personal gain. The fact that you did not directly harm the client is irrelevant.

An accounting firm always has temporary cash flow problems in mid-April due to the growth of its accounts receivable at the end of tax season. Rather than impose harsh workforce layoffs, the firm's managing partner used FICA taxes withheld from employees' April paychecks to pay the firm's utility bill. This accounting firm fully remitted all employee payroll tax withholdings to the appropriate tax authorities two weeks later upon collecting several large client receivables. Did the managing partner commit a discreditable act?

Yes. An accountant must comply with all tax deadlines. This includes the duty to remit employee payroll tax withholdings to the appropriate government authorities on a timely basis

A CPA audits an automobile dealership. The CPA is in a long-term romantic relationship with a close companion who owns 3% of this dealership. In applying the Independence Rule, is the CPA considered to have an ownership stake in the dealership?

Yes. An ownership interest held by a covered member's immediate family members, such as a spousal equivalent, is treated as if it is the covered member's own property.

You are employed as a pension plan administrator at a midsized corporation. The company's code of conduct protects workers against retaliation if they report "violations of state or federal securities laws, theft, embezzlement, or related financial misconduct" to the company's confidential hotline, Audit Committee, or General Counsel. You recently reported to the SEC that the company's pension plan accounting was misleading and inaccurate. Unknown to you, the company's policies were in fact accurate because a recent FASB pronouncement altered pension plan accounting rules. Your employer now has demoted you to a position with fewer opportunities for career advancement because you are "combative" and submitted an "erroneous challenge to the company's reporting policies." When you asked the company's General Counsel to reinstate you to your previous position, she told you that your claim was denied because "it has clearly been shown that no accounting or securities law violations were present." Has the company violated antiretaliation laws?

Yes. Antiretaliation laws protect employees whose accusations were incorrect in hindsight, as long as they sincerely asserted their claims in good faith. Otherwise, many potential informants would refrain from expressing their concerns, especially about complex areas of accounting.

In performing a review, you requested that your client provide information about land values reported on its balance sheet. The client asked a real estate appraiser to send the most recent valuation report concerning this land directly to you. Although this consultant usually stamps the word Confidential on each page of her reports, she forgot to do so on this occasion. Do you have a duty to maintain this report as confidential?

Yes. Appraisal reports contain proprietary information that a client customarily would expect an accountant to keep confidential. Because the appraiser was acting at the direction of the client, the appraisal report should be considered to be a client-provided communication

An engaged couple has agreed to enter into a prenuptial agreement before getting married. They each have retained you to specify an appropriate amount of alimony that one spouse should pay to the other in the event that they one day get divorced. You previously have never had a personal or professional relationship with either of these individuals. Do you have a conflict of interest?

Yes. Both spouses have adverse economic interests because alimony provides a financial benefit to one of these clients and a financial cost to the other. Thus, this situation presents a Dual-Client Conflict. Although you do not have any reason to favor either of these individuals, a conflict of interest nonetheless exists.

A small start-up company needs at least $100,000 to buy inventory and launch its online retail website. After carefully investigating this company's business prospects, you invested $60,000 to purchase stock in this company. When one of your wealthy accounting clients asked for investment advice, you sincerely recommended that he buy stock in this start-up company. Relying on this advice, your client purchased $8,000 of stock in this start-up company. Did you have a conflict of interest in making this recommendation?

Yes. Even though you and your client now share the same general goals, a conflict of interest currently exists if it is reasonably foreseeable that two parties' goals will diverge in the future. At present, it is foreseeable that you will want to sell the building in the near term to obtain liquidity, but your highly taxed client's interests will be best served by continuing to hold the building. As a result, your client, at minimum, reasonably might doubt the objectivity of your professional advice.

You currently serve as a paid financial consultant to the Board of Directors of a local church-affiliated high school. Due to recent funding cutbacks, the Board of Directors has asked you for advice about whether it should decrease the size of its student body. Your younger brother soon will be applying for admission to this highly selective high school. He is worried that his academic record is "probably borderline" for being admitted. Do you have a conflict of interest in rendering advice to the school?

Yes. Even though you and your client now share the same general goals, a conflict of interest currently exists if it is reasonably foreseeable that two parties' goals will diverge in the future. At present, it is foreseeable that you will want to sell the building in the near term to obtain liquidity, but your highly taxed client's interests will be best served by continuing to hold the building. As a result, your client, at minimum, reasonably might doubt the objectivity of your professional advice.

When telecommunications company Global Crossing exited the bankruptcy process in the final quarter of 2003, it miraculously reported net income of nearly $25 billion, even though its revenues were substantially less than $1 billion. The company accomplished this Houdini-like feat by recording the court-ordered cancellation of its debts as a Gain, using the following journal entry format: Liabilities xxx Gain xxx Assume that, under the literal GAAP rules on debt extinguishment, this journal entry is correct. Should Global Crossing's auditors have insisted that Global Crossing alter this financial statement presentation?

Yes. Global Crossing's seemingly impossible net profit margin of $25 billion on less than $1 billion of sales would have been misleading to readers of its financial statements. To prevent reader confusion, Global Crossing did not report this Gain from Debt Extinguishment on the face of its income statement. Instead, the company's financial statements included a supplemental disclosure that discussed the nature of this unusual accounting event and the rationale for this departure from GAAP.

A CPA serves on the audit engagement team for Oncolygics and does not own any stock in this audit client. However, her younger brother is a college senior who boasted that he spent most of his savings to buy stock in Oncolygics. Is this CPA deemed to have an ownership interest in Oncolygics?

Yes. Her brother is a close relative whose ownership interest in Oncolygics is material to his net worth.

A CPA recently was found guilty of lying on a police report. She had claimed that another driver caused damage to her car, in the hope of collecting money from the other driver's insurance company. However, the damage to her car was attributable to an unrelated traffic accident that had occurred years earlier. The CPA pleaded guilty to a misdemeanor. Is she at risk for losing her license to practice accounting?

Yes. In all jurisdictions, a CPA can lose her professional license due to a conviction for wrongful conduct involving dishonesty or fraud, even if the conduct was not serious enough to be classified as a felony.

At a recent dinner meeting with an accounting client, he told you that he was "enjoying the thrill" of having an extramarital affair. When you returned home that night, you told your spouse that you were disgusted by your client's personal conduct. Your spouse knows the client's wife, but they are not social friends. Did you violate the Code of Conduct's duty of confidentiality?

Yes. Information about your client's extramarital affair was not known to the general public, and your client had a reasonable expectation that you would keep this information confidential. The duty of confidentiality is not restricted to business information. It applies to any embarrassing or harmful information that a client reasonably expects to be kept secret.

As the controller for a family owned party planning company, you were moderately pleased that the company's sales grew 2% over last year. Your company always ends its fiscal year on the first Monday of January, rather than on December 31. Although this fiscal-year pattern may seem odd, it is fairly common in certain industries, such as restaurants and movie theaters, that generate substantial sales on weekends. However, by starting every fiscal year on a Tuesday and ending it on a Monday, some fiscal years have 52 weeks and others have 53 weeks. The company's current fiscal year is comprised of 53 weeks, and the preceding fiscal year was comprised of 52 weeks. Does your company have a duty to disclose this fact in connection with its financial statements?

Yes. Many financial statement users evaluate trends in a company's operations by comparing current operating results to those of the preceding year. A cursory review of your company's financial statements suggests that sales are growing. However, after adjusting the current-year sales growth of 2% for an extra week of sales activity, company results in reality were essentially unchanged. Therefore, your company must put its sales growth in context to prevent readers from being misled about the true sales trend.

You were appalled when you overheard two employees in your company's payroll processing department openly talking about how they "made zillions of dollars" by engaging in insider trading of the company's stock on the day before its quarterly earnings were released. You decided to take action by reporting their wrongdoing on the SEC's Whistleblower Hotline. In your report to the SEC, you did not contend that the company's financial statements contained misstatements. Also, you failed to specify the particular securities statute that your colleagues violated. Are you potentially entitled to collect a reward as a whistleblower under the Dodd-Frank Act?

Yes. The Dodd-Frank Act covers any report that relates to a securities law violation, including illegal insider trading. The violation does not necessarily have to involve improper accounting practices, and an informant does not have to specify the particular law that was violated.

Your audit client asked you to prepare a bank reconciliation based on its bank statements, canceled checks, and supporting documents. After doing so, the client's Chief Financial Officer reviewed the bank reconciliation, made minor changes, and entered the resulting Cash and Cash Equivalents balance in the database that you will audit. The client's responsibilities and the scope of the nonattest services were documented in writing before you performed this task. Do you still satisfy the Independence Rule to audit this client?

Yes. The client made the ultimate management decision concerning the bank reconciliation, evaluated the adequacy of the CPA's work, accepted responsibility for the work, and documented the scope of the services in advance.

A superstar college soccer player asked his coach whether he should leave school early to pursue a well-paying career as a professional soccer player in Europe. The coach advised the player that his earnings will be greater over the long run if he stays in school one more year to refine his skills. Does the coach have a conflict of interest?

Yes. The coach's personal interest in keeping a talented player on his team potentially conflicts with his ethical duty to give this player objective advice.

A male supervisor in your company's Internal Audit Department has asked a female subordinate twice if she would like to "come over, wear a tiny bikini, and swim at the pool." Each time, she politely declined. One afternoon, the male supervisor insistently told this same woman that "they were having dinner tonight. Don't worry, it's strictly business." She agreed out of concern that her refusal might jeopardize her job. That evening at dinner, the male supervisor brought her flowers, complained about his sex life, and told her that, if she "played her cards right," she could have any job she wanted in his department. Did the supervisor's actions constitute sexual harassment?

Yes. The supervisor's social offers for the female subordinate to "come over" to swim were objectionable, but these offers probably did not constitute harassment, standing alone.

You work as an internal auditor for a publicly traded company. All employees at this company receive annual performance reviews in which they receive an overall rating from their Department Head ranging from 1 to 10, with 10 being the best. During the seven years that you have worked there, you usually have a received an overall rating of 4, which is slightly below average. Employees with an overall rating of 4 usually receive annual pay raises of between 5% and 7%. This past year, you informed the company's Audit Committee in good faith that your Department Head engaged in a cover-up of certain fraudulent interdepartmental transactions. Shortly thereafter, your Department Head gave you a rating of 2, which resulted in you being denied a pay raise. Dismayed by this, you filed an internal claim against your employer for whistleblower retaliation. The company, in its reply, principally justified its denial of your pay raise by noting that "you slacked off by working seven fewer hours of overtime" than your peers in the internal audit department. Are you likely to succeed in a whistleblower claim against your employer for retaliation?

Yes. You customarily have always received an overall rating of 4. Your rating this year fell to a 2, even though the only documented change in your performance was that you worked slightly fewer overtime hours. Your overtime work habits would have justified, at most, only a minor downward adjustment in your pay raise. Accordingly, your involvement as an informant appears to have been a contributing factor that led your employer to deprive you of a deserved pay raise. The company will be unable to prove that it would have given you such a poor raise even if you had not engaged in whistleblower activities.

A few months ago, you left your job with Louisiana Shrimp to join a CPA firm that specializes in employment-related matters. Soon thereafter, a potential client approached you to negotiate workers' compensation for her from Louisiana Shrimp. May you represent this prospective client?

Yes. You did not have an actual conflict of interest because you sincerely believed that this stock was a wise and suitable investment for your client. However, your client reasonably might have wondered if you placed your personal goal of helping this start-up company to succeed above his interests. As a result, your recommendation, at minimum, created the appearance of a conflict of interest

Your direct supervisor told you to "inflate the company's Sales Revenue by adding in a few extra sales on credit." You have heard that others have gotten fired for disobeying this supervisor, so you went along with her instruction. Did you commit a discreditable act?

Yes. You may not record materially false entries, even if your refusal could cause you to lose your job.

Your audit client has decided to lay off 6% of its workforce. It has requested your assistance in deciding which employees should be terminated. In response to this request, you determined the total compensation earned by each company employee, including the costs of employee stock options, pension contributions, and other fringe benefits. Then, based on your analysis, the client ranked workers based on their cost-benefit productivity and sent the least productive employees termination letters. Do you still satisfy the Independence Rule to audit this client?

Yes. You merely gave your client cost data that your client in turn used to make its own workplace decisions.

Your client has asked you to negotiate a new lease on his behalf with a shopping center's leasing agent. When discussing this negotiation with a fellow partner in your CPA firm, she exclaimed, "Wow, that's a coincidence . . . I'm engaged to marry that leasing agent!" May you continue to represent your client in this lease negotiation?

Yes. Your colleague has a conflict of interest, but you are not precluded from continuing to serve this client as long as appropriate barriers shield your colleague from information concerning this lease negotiation.

As a CPA on a fast-track career at a global conglomerate, every day brings new surprises. Last night, though, you saw something that was indeed shocking. The company's CFO, apparently unaware that you were still in the office, put on a ski mask to hide his face and loaded beautiful leather chairs from a conference room into his parked van. You could not believe it, but he was stealing those chairs! When you mentioned this to your supervisor, she told you, "Yeah, it's kinda bizarro, but he steals expensive items from the company and then has the audacity to display them at his home in plain view. When the CFO hosted the company holiday party at his house last year, I was shocked to see company chairs, lamps, and paintings in his living room!" According to the Code of Conduct, do you have any further specific duties to report the CFO's activities? a. No, because accountants working in industry never are required to act as whistleblowers b. No, because the value of the stolen chairs was immaterial to the company's financial statements c. No, because you fulfilled your duty by informing your supervisor d. Yes, because the Code of Conduct considers theft by a financial officer to always be a material event

a. No, because accountants working in industry never are required to act as whistleblowers

Your supervisor at work is currently going through a nasty child custody battle with her ex-husband. Although you are a single male without children, you always listen empathetically to her troubles. Last week, your supervisor, a CPA, asked you provocatively, "How do you look so damn sexy this early in the morning?" Also, a few days later, she asked, "Would any of your cute guy friends want to hit the town Saturday night with a lonely woman like me?" Your company does not have any policy guidelines concerning workplace dating or harassment. Did your supervisor commit a discreditable act under the Code of Conduct? a. No, because her conduct is unlikely to constitute illegal sexual harassment b. No, because your company does not have any policies concerning flirting or employee dating c. Yes, because her actions are offensive and pervasive d. Yes, even though she did not make any threats concerning your pay or job security

a. No, because her conduct is unlikely to constitute illegal sexual harassment

Independence Rule

auditors must evaluate financial statements and avoid anything that might doubt an auditor's objectivity - Do not have to follow if they work in industry or tax return prep or consulting

You were thrilled to be your friend Amy's bridesmaid when she married Ryan, and you were ecstatic when they later had a child. Your memories turned bittersweet, though, when you recently learned that they now are divorced. Although Amy and Ryan no longer file a joint tax return, they both have expressed a desire for you to continue as their tax accountant. You agreed and assured them that you will remain impartial. Ryan regularly pays $700 per month to Amy, who has primary custody of their child. Ryan and Amy have never documented whether these payments are classified as alimony or child support. Under the tax law, this distinction is important because alimony payments are taxable to the recipient and tax-deductible by the payor, but child support has no tax effects. Also, courts frequently modify child support payments if either parent's income changes materially, but rarely alter alimony agreements. Can you ethically continue to prepare individual tax returns for Amy and her ex-husband Ryan? a. Yes, because you have an ethical duty to honor your agreement with them b. Yes, because both parties have given their consent c. No, because your longstanding friendship with Amy inherently creates the appearance of favoritism toward her d. No, because your knowledge each client's earnings creates a potential conflict of interest

b. Yes, because both parties have given their consent

While performing audit fieldwork at Biggold Bank, you were approached by a bank executive to "leave your career behind" as an external auditor to become a Biggold Bank loan officer. Intrigued by this proposition, you nodded your head in agreement when this executive asked that your preliminary employment discussions remain confidential. In your sincere professional judgment, the prospect of accepting employment with Biggold Bank does not affect your ability to diligently perform your current audit responsibilities. Should you make disclosures to anyone on your audit engagement team? a. Yes, because you will consciously or unconsciously try to ingratiate yourself with the client b. Yes, because others might reasonably doubt your ability to perform audit duties with complete objectivity c. No, because you expressly promised to keep the conversation confidential d. No, because your conversations thus far with this bank executive lack specificity and are merely preliminary inquiries

b. Yes, because others might reasonably doubt your ability to perform audit duties with complete objectivity

Your client is an advertising agency that pays inexperienced new models $20 per hour during a photo shoot, but does not compensate them for preparation time spent in wardrobe fittings, hair styling, or applying makeup. Thus, after counting all hours worked, you are concerned that these models are being paid less than the minimum wage. The Wage and Labor Protection Board in your state maintains a hotline for anonymous callers to report labor law violations. Informants receive a reward equal to 20% of the penalties collected from violators. If granted such a reward, you will donate it to charity. Should you contact this hotline to report your concerns? a. Yes, if you informed your client about this issue and it has refused to take corrective actions b. Yes,aslongasthereward,ifgranted,ispaiddirectlytoacharitableorganization c. No, because you learned of these violations during the course of rendering professional services d. No,becauseyoulacktheprofessionaltrainingandexpertisetoknowwhether your client's suspected misconduct is an actual labor law violation

c. No, because you learned of these violations during the course of rendering professional services