14 - Codes of professional ethics and regulatory issues

Question 1

What are some of the reasons why a principal based framework is better than a rule based one?

Answer 1

Active consideration and demonstration of conclusions - A framework of principles places the burden on the accountant to actively consider objectivity for every given situation, rather than just agreeing a checklist of forbidden items

Broad interpretation of ethical situations - Principle based framework prevents auditors interpreting legalistic requirements narrowly to get around ethical requirements. To an extent, rules encourage deception whereas principles encourage compliance.

Individual situations covered: A principles based framework allows for the variations that are found in individual situations. Each situation is likely to be different.

Flexible to changing situation:
A principles based framework can accommodate a rapidly changing environment, such as assurance.

Question 2

IESBA code - fundamental principles

PIPCO

Answer 2

Integrity - Professional accountant should be straightforward and honest in all professional and business relationships.

Objectivity - A professional accountant should not allow bias, conflict of interest or undue influence of others to override professional or business judgments

Professional competence and due care - Professional accountant has duty to maintain knowledge and skill at the level required to ensure that a client or employer receives competent professional services based on current developments on the industry. Should act diligently and in accordance with technical and professional standards

Confidentiality - A professional accountant should respect the confidentiality of info acquired as a result of professional and business relationships and should not disclose any such info to third parties without authority unless there is a legal or professional right or duty to disclose.

Professional behaviour - Should comply with relevant laws and regulations and should avoid any action that discredits the profession

Question 3

What are the 2 general categories of safeguard identified by the IESBA code? Examples too

Answer 3

Safeguard created by the profession, legislation or regulation:

Educational training and experience requirements for entry into the profession
Continuing professional development requirements
Corporate governance regulations
Professional standards
Professional or regulatory monitoring and disciplinary procedures
External reviews

Safeguards in the work environment:

Involving an additional professional accountant to review the work done
Consulting an independent 3rd party
Rotating senior personnel
Disclosing to those charged with governance the nature of services provided and extent of fees charged
Declaration of independence

Question 4

What are 2 codes you have to comply with?

Answer 4

The ICAEW code and the FRCs Ethical standards for auditors.