10: Ethics

Question 1

What are the five fundamental principles in the ICAEW Code of Ethics?

Answer 1

Integrity
Objectivity
Professional competence and due care
Confidentiality
Professional behaviour

Question 2

What are the five threats to compliance?

Answer 2

Self interest

Self review

Advocacy

Familiarity

Intimidation

Question 3

What are the 8 safeguards against threats?

Answer 3

Education/training/experience
CPD requirements
Corporate governance regulations
Professional standards
Monitoring/disciplinary procedures
External review
Complaints systems
Explicitly stated duty to report breaches of ethics

Question 4

What are the steps to follow when resolving ethical conflicts?

Answer 4

1. Consider these factors
   - relevant facts and parties
   - ethical issues involved
   - fundamental principles relating to matter
   - establish internal procedures
   - alternative courses of action
2. Seek advice in the firm and document advice
3. Seek legal advice or advice from ICAEW
4. Withdraw

Question 5

Who can conflict of interest arise between?

Answer 5

Firm and client

Two clients (managed by the same firm)

Question 6

What steps are there to action a conflict of interest?

Answer 6

1. Notify relevant parties
2. Obtain consent from relevant parties to act

If they refuse
- cease acting for one party

If they grant permission
- use separate teams
- prevent access to information
- issue guidelines to team members in relation to security and confidentiality
- confidentiality agreements
- regular review of safeguards by independent staff

Question 7

What is tax planning (best)?

Answer 7

Legal

A form of tax avoidance where a tax payer uses legislation legally to minimise tax bills but pay the correct amount of tax

Question 8

What is tax avoidance?

Answer 8

Using any legal method to reduce an entity’s tax burden, even if method doesn’t follow intent of the law

General anti abuse rule (GAAR) enables HMRC to challenge abusive tax avoidance arrangements

Question 9

What is tax evasion?

Answer 9

Illegally seeking to pay less tax by deliberately misleading HMRC.

Carries risk of criminal prosecution

Two main forms:
- suppressing tax info
- submitting false info

Question 10

Three ways someone can engage in money laundering?

Answer 10

Conceals, disguises, etc, criminal property

Enters into an arrangement that they know or suspect might facilitate the acquisition of criminal property

has the criminal property

Question 11

Three regs on AML?

Answer 11

Money Laundering Regulations 2017
Proceeds of Crime Act 2002
Crime and Police Act 2005

Question 12

5 AML procedures?

Answer 12

Register with a supervisory body

Appoint a Money Laundering Reporting Officer

Establish internal procedures to reduce risk of being involved

Verify the identity of new clients
- keep docs for 5 years after end of relationship

Maintain records of all transaction for client five years after completion of transaction

Question 13

What are the penalties for money laundering?

Answer 13

Up to 14 years for main money laundering

Up to 5 years for failure to report an offence

Up to 2 years for tipping off