Professional Ethics and the Government Auditor ASMC Fort Meade Chapter Johnny Ramsey, Senior Manager KPMG LLP November 17, 2015

© 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 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 KindergartenRobert FulghumAll 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 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 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 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 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 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 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 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 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 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 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 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 GAO Yellow book GAO Conceptual Framework Allows the auditor to assess unique circumstances Adaptable Consistent with AICPA and IFAC frameworks Significant differences from ET (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 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 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 “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 KindergartenRobert FulghumAll I Really Need to Know I Learned in Kindergarten

For Further Information 17 Johnny E. Ramsey, CPA, CGFM, CGMA, CISA Senior Manager, KPMG LLP

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