01. BPT - Ethics Flashcards
What are the fundamental ethical principles?
Integrity Objectivity Professional competence and due care Confidentiality Professional behaviour
Define integrity
Professional acc must be
- straightforward
- honest
in all professional and business relationships
Define objectivity
Not allow bias, conflict of interest or undue influence override prof/bus judgements
Define prof competence and due care
Duty to
- Maintain prof knowledge and skill at level required to ensure clients receive competent prof service based on current practice
- Act diligently in accordance with technical and prof standards
Define confidentiality
- Respect the confidentiality of info acquired as a result of professional bus relationships
- Refrain from disclosing such info without proper and specific authority unless legal duty to disclose
Define professional behaviour
Must comply with all laws and regs
Avoid any action that discredits the profession
What are the threats that may threaten the fundamental principles?
Self interest threats Self-review threats Advocacy threats Familiarity threats Intimidation threats
Define a self interest threats
May occur as result of financial or other interest of a prof acc/immediate/close family member
Define a self review threat
When previous judgement needs to be re-evaluated by the prof acc responsible for the judgement
Define an advocacy threat
When a prof acc promotes a position/opinion to the point that subsequent objectivity may be compromised
Define intimidation threats
When prof acc may be deterred from acting objectively by threats, actual or perceived
What are the safeguards created by the profession/legislation or regulation to mitigate threats
- Educational, training and experience requirements for entry into the prof
- Continuing Professional development
- Corporate governance regulations
- Professional standards
- Professional/ regulatory monitoring and disciplinary procedures
- External review by legally empowered third party
What are the safeguards in the work environment to mitigate threats to the fundamental principles?
- Effective, well publicised complaints system operated by employing org to allow e’res to draw attention to unprofessional/ unethical behaviour
- An explicit stated duty to report breaches of ethical requirements
What does PCRT stand for?
Professional Conduct in Relation to Taxation
What is the purpose of the PCRT?
Produced by various acc/tax bodies
Includes practical advice about ethical and legal issues arising in tax work and considers relationship with both clients and HMRC
What are the standards included in PCRT for tax planning?
Client specific Lawful Disclosure and transparency Tax planning arrangements Professional judgement and appropriate documentation
Describe the following PCRT principle
Client specific
Must be specific to the particular clients facts and circumstances
Clients must be alerted to wider risks and implications of any courses of action
Describe the following PCRT principle
Lawful
Members must act lawfully and with integrity and expect the same from their clients
- Tax planning should be based on a realistic assessment of all facts, and on a credible view of the law
- Draw client attention to material legal uncertainties (e.g. if HMRC is known to view the law diff)
- Members should consider taking further advice appropriate to risks/circ of the particular case (e.g. where litigation is likely)
Describe the following PCRT principle
Professional judgement and appropriate documentation
Applying these requirements to particular client advisory situations applying these requires members to exercise professional judgement on a number of matters
Members keep notes on timely basis about rationale for judgements exercised in seeking to adhere to these requirements
Who can conflicts of interest arise between?
Firm and client
Two clients managed by the same firm
What must members do to identify threats of conflict of interest?
Members must take reasonable steps to identify any conflicts of interest (therefore threats to compliance with fundamental principles)
What steps should be taken if a conflict of interest is identified?
- Notify relevant parties of ay actual/ potential conflicts of interest
- Obtain consent of relevant parties to act
- If consent is refused, cease acting for one party involved in the conflict
If consent is given for an acc to continue to act when there is a conflict of interest, what steps should be taken?
- Use separate engagement teams
- Impose procedures to prevent access to info
- Issue guidelines to team members re security/ confidentiality
- Use confidentiality agreements for e’ees/ partners
- Regularly review safeguards: should be done by senior not involved with engagements
- If the conflict can’t be resolved, consider not accepting /resigning from one engagement
What factors should be considered when initiating an ethical conflict resolutions process?
- Relevant facts
- Ethical issues involved
- Fundamental principles related to matter in question
- Parties involved
- Established internal procedures
- Alternative courses of action
What must be done if an ethical conflict remains unresolved?
- Seek advice within own firm and document advice given (if conflict is within org, consider consulting those charged with governance)
- Seek legal advice/ advice from prof body/advisers
- Consider withdrawing from eng/ conflicting situation
What must be done if an ethical conflict remains unresolved?
- Seek advice within own firm and document advice given (if conflict is within org, consider consulting those charged with governance)
- Seek legal advice/ advice from prof body/advisers
- Consider withdrawing from eng/ conflicting situation
When may an acc disclose confidential info
- Permitted by law and is authorised by client/e’er
- Disclosure if required by law
Examples
-> Production of documents or other provision of evidence in the course of legal proceedings
-> Disclosure to the appropriate public authorities of infringements of the law e.g. under AML - Prof duty/right to disclose, when not prohibited by law to
- > Comply with quality review of a member body/ prof body
- > Respond to inquiry/ inv by member body/ regulatory proceedings
- > comply with technical standards and ethics requirements
Describe how any errors found must be dealt with
- Acc are advised to include in their letters of eng authority to advise HMRC of errors, otherwise client consent is required
- If consent is withheld either
- -> Seeking legal advice
- -> Ceasing to act for the client
What must be done if an error is found that leads to the overpayment of tax?
- Client should be advised ASAP as to the existence of the error and the possibility of a repayment claim
What must be done if an error is found that leads to the underpayment of tax?
Tax advisor should be aware of the possible implications under the ML legislation
If relevant, a disclosure may be appropriate without the need to gain client consent
Describe new client procedures
- When considering the client consider:
- Whether acceptance creates any threats to compliance with fundamental principles?
- Is the firm competent to provide the services requested
Eng letters should
- Make it clear whether they are agent for client or as principal
- Cover the scope of client’s and agent’s respective responsibilities
- Discuss responsibility for tax returns
Professional indemnity insurance
- Adequate cover should be in place (min £1.5m unless firms gross fee income is under £600k, then its 2.5x gross fee income with min of £100k)
- Continue to hold cover for at least 2 years after ceasing (preferably 6)
Describe what should be included in engagement letters
- Should make it clear in what capacity the accountant is acting, as an agent for the client or as a principal
- Should cover the scope of the client’s and agent’s respective responsibilities
Describe the capacity as an agent
- Acting on client’s behalf: client retains responsibility for accuracy, so this is a low risk activity
Example: submitting SA
Acc owes a duty of confidentiality to client (no disclosure unless authorised by taxpayer)
Duty only overridden if:
- Client suspected of ML
- HMRC exercises stat powers to obtain information
- Court order forces acc to make disclosure
Describe the capacity as a principle
Provision of tax advice
May be liable to the taxpayer if advice is incorrect or inappropriate so this is considered to be a high risk activity
Describe the various responsibilities of the parties involved in tax returns
- Client retains responsibility for the accuracy of a tax return. Acc should draw the client’s attention to this
- Acc should obtain written evidence of the client’s approval of the return
- At times, acc may recommend fuller disclosure in a tax return than is strictly necessary, e.g. when significantly tax planning is involved
- Client made aware of potential issues and implications of actions. Fller disclosure shouldn’t be made unless the client gives her permission
What PII should be given?
Adequate cover should be in place (minimum of £1.5m unless the firm’s pros fee is under £600k- then it’s 2.5x gross fee income with minimum of £100k
Must continue to hold cover for at least 2 years after ceasing to practice, preferably 6 years
What are the new rules surrounding data protection
- Anyone who handles personal data has obligation to protect data under GDPR and to adhere to DP Act 2018
Compliance with GDPR is overseen by ICO
Any person/bus processing personal data must register with ICO
Most businesses must appoint a data protection officer
ICO must be informed within 72hrs of breach that affects the rights and freedom of individuals
What can non-compliance of data protection lead to?
- Criminal conviction when a criminal offence under Data Protection Act has been committed
- A fine of up to 20m euros or 4% of firms global turnover
What steps must be taken to prevent unauthorised access to client records?
- Passwords to access data being kept safe and computers kept physically secure
- Such passwords being changed regularly
- Any unusual activity on clients online HMRC records being reported immediately
- Suspicious emails appearing to be from HMRC being forwarded to HMRC’s phishing team
