Professional Ethics and the
Government Auditor
ASMC Fort Meade Chapter
Johnny Ramsey, Senior Manager
KPMG LLP
November 17, 2015
Opening thoughts
“You will continue to read stories of crookedness and
corruption - of policemen who lie and steal, doctors who
reap where they do not sow, politicians on the take. Don't
be misled. They are news because they are the exceptions.”
― Robert Fulghum, All I Really Need to Know I Learned in
Kindergarten
© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
NDPPS 134407
1
The role and responsibility of the auditor
Auditors give assurance to varied stakeholders.
Auditors as professionals have to maintain the level of
confidence the users of the auditor’s report have in them.
In acting in the interest of the public, auditors observe and
comply with some high level principles.
Most professional associations have embodied the
principles into code of ethics for their members.
© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
NDPPS 134407
2
Integrity
Be straightforward and honest in performing professional services.
© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
NDPPS 134407
3
Objectivity
Be fair and do not allow prejudice or bias, conflict of interest or
influence of others to override objectivity.
© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
NDPPS 134407
4
Professional Competence and Due Care
Perform professional services with due care, competence, and
diligence.
Recognize the continuing duty to maintain professional knowledge and
skill at a level required to ensure that an employer or client receives the
advantage of competent professional service based on up-to-date
developments in practice, legislation and techniques.
© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
NDPPS 134407
5
Confidentiality
Respect the confidentiality of information acquired during the course of
performing professional services and do not disclose or use any such
information without proper and specific authority or unless there is a
legal or professional right or duty to disclose.
© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
NDPPS 134407
6
Examples of breaking confidentiality
Example 1: Gail is an employee of the Department of the Navy who learns that her agency
will award a contract to Supplier Corporation. Before the contract is publicly announced,
Gail calls her stockbroker and purchases stock in Supplier Corporation.
Example 2: Harry, a General Services Administration employee, discloses the terms of a
proposal for a GSA construction contract to a friend whose company has submitted a
competing proposal.
From Office of Government Ethics website
© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
NDPPS 134407
7
Professional Behavior
Act in a manner consistent with the good reputation of the profession
and refrain from any conduct that might bring discredit to the
profession.
© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
NDPPS 134407
8
Violation of integrity and conflict of interest
Jodi was an auditor for the Defense Contract Audit Agency (DCAA). While employed
at DCAA, she was the primary DCAA auditor for cost proposals, labor rates and
claims for the Missile Defense Agency (MDA), an agency responsible for developing,
testing and fielding an integrated Ballistic Missile Defense System for the United
States. During her employment, the Alaska Aerospace Corporation (AAC) operated
the Kodiak Launch Complex in Kodiak, Alaska, which provided support for target
vehicle launches used in missile defense testing.
Jodi left DCAA and was hired by AAC as Controller. Shortly after being hired by AAC,
Jodi communicated with and appeared before the DCAA on behalf of AAC regarding
the same MDA contract she had previously audited as an employee of DCAA, with the
intent to influence the DCAA about the contract.
© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
NDPPS 134407
9
Results
Jodi entered into a plea agreement pursuant to which she pleaded guilty to a
one count Information charging her with violating 18 U.S.C. §§ 207(a)(1) and
216(a)(1). She was sentenced two-year probation, a $5,000 fine and a $25
special assessment.
© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
NDPPS 134407
10
Technical Standards
Carry out professional services in accordance with the
relevant technical and professional standards.
Recognize the duty to carry out with care and skill, the
instructions of the employer or client insofar as they are
compatible with the requirements of integrity, objectivity,
and, where applicable, independence.
© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
NDPPS 134407
11
Overarching guideline - Independence
In all matters relating to the audit work, the audit organization
and the individual auditor, whether government or public, must
be independent.
Independence comprises:
Independence of Mind
Independence in Appearance
© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
NDPPS 134407
12
GAO Yellow book
GAO Conceptual Framework
Allows the auditor to assess unique circumstances
Adaptable
Consistent with AICPA and IFAC frameworks
Significant differences from ET-101-3 (PCAOB)
Entry point for independence assessment
Emphasis on services “in aggregate”
Documentation requirements
© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
NDPPS 134407
13
GAO Yellow book - continued
Applying the Framework
Identify threats to independence
Evaluate the significance of the threats identified, both individually and in the
aggregate
Apply safeguards as necessary to eliminate the threats or reduce them to an
acceptable level
Evaluate whether the safeguard is effective
Documentation Requirement:
Para 3.24: When threats are not at an acceptable level and require application of
safeguards, auditors should document the safeguards applied.
© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
NDPPS 134407
14
Applying the Framework: Categories of Threats
1.Management participation threat – the threat that results from an auditor’s taking on the role of
management or otherwise performing management functions on behalf of the entity undergoing
audit
2.Self-review threat – after performing non audit services, not appropriately evaluating the results
of previous judgments made
3.Bias threat – the threat that an auditor, as a result of political, ideological, social or other
convictions, will take a position that is not objective
4.Familiarity threat – the threat that aspects of a relationship with management or personnel with
an audited entity, such as a close or long relationship, will lead an auditor to take a position that
is not objective
5.Undue influence threat – threat that external influences or pressures
6.Self interest threat – threat of a financial interest
7.Structural threat – the threat of the audit organization’s placement in the entity will impact its
ability to perform its work independently and objectively.
© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
NDPPS 134407
15
“Don't sell yourself short. You may never have proof of your
importance, but you are more important than you think.”
― Robert Fulghum, All I Really Need to Know I Learned in
Kindergarten
© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
NDPPS 134407
16
For Further
Information
Johnny E. Ramsey, CPA, CGFM,
CGMA, CISA
Senior Manager, KPMG LLP
202-533-3292
jeramsey@kpmg.com
17
The information contained herein is of a general nature and is not intended to address the circumstances of any particular
individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act
upon such information without appropriate professional advice after a thorough examination of the particular situation.
© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
NDPPS 134407
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