6. Osborne - Threats and safeguards to fundamental ethical principles

Question 2

Principles of Professional Ethics (CH5)

Define Professional Ethics.

Answer 2

The professional ethics of an organisation are the moral principles or standards that govern the conduct of the members of that organisation.

Question 3

Principles of Professional Ethics (CH5)

What do professional accounting bodies base their code of ethics on?

Answer 3

All professional accounting bodies including AAT base their code of ethics on the International Ethics Standards Board for Accountants (IESBA) code of ethics.

The AAT code applies to all Fellows, Full, Affiliate and Student Members.

Question 4

Principles of Professional Ethics (CH5)

What are the 5 Fundamental Ethical Principles? (PIPCO)

Answer 4

1. Integrity
2. Objectivity
3. Confidentiality
4. Professional Competence and Due Care
5. Professional Behaviour

PIPCO.

Question 5

Principles of Professional Ethics (CH5)

What is Integrity? (PIPCO)

Answer 5

Quality of being straightforward and honest in all professional and business relationships and when performing professional work.

Question 6

Principles of Professional Ethics (CH5)

What is Confidentiality? (PIPCO)

Answer 6

• Confidential information shall not be used for the personal advantage of the member or third parties.
• The duty of confidentially extends even after the relationship with employers has ended.

Question 7

Principles of Professional Ethics (CH5)

When is it acceptable to Disclose Confidential Information?

Answer 7

1. When authorised by a client or employer.
2. When disclosure is required by law.
3. Where there is a professional duty to disclose.

Question 8

Principles of Professional Ethics (CH5)

When does an accountant have a Professional Duty to Disclose?

Answer 8

A. To comply with a quality review of an International Federation of Accountants (IFAC) or other professional bodies.
B. To respond to an inquiry by the professional accounting body or by a regulatory body of an ethical, investigatory or disciplinary nature.
C. To protect the professional interests of the accountant in legal proceedings.
D. To comply with technical standards and ethical requirements.

Question 9

Principles of Professional Ethics (CH5)

What is Professional Behaviour? (PIPCO)

Answer 9

Complying with relevant laws and regulations and avoiding any action that brings the profession into disrepute.

Question 10

Principles of Professional Ethics (CH5)

What does Professional Scepticism involve?

Answer 10

1. A questioning mind.
2. Being alert to mistakes which may indicate possible error or fraud.
3. Making critical assessment of evidence that is provided.

Question 11

Threats and Safeguards to Fundamental Ethical Principles (CH6)

What is a Conceptual Framework?

Answer 11

Conceptual Framework - is a set of principles to help accountants to act ethically.

Question 12

Threats and Safeguards to Fundamental Ethical Principles (CH6)

What is a Principle-based Approach?

Answer 12

A principles-based approach to ethics requires an accountant evaluate anything that may prevent him/her following the fundamental ethical principles.

• If the principles are threatened then he/she should put safeguards in place to minimise the threats.

Question 13

Threats and Safeguards to Fundamental Ethical Principles (CH6)

Name the 5 Threats to Ethical Behaviour.

Answer 13

1. Self-Interest
2. Self-Review
3. Familiarity
4. Intimidation
5. Advocacy

Question 14

Threats and Safeguards to Fundamental Ethical Principles (CH6)

Explain the 5 Threats to Ethical Behaviour.

Answer 14

1. Self - interest - These may occur where a financial or other interest will inappropriately influence the accountant’s judgement or behaviour.

2. Self-review - These may occur when an accountant has to re-evaluate a judgement or data that he/she has previously made or produced.

3. Familiarity - These may occur when, because of a close or personal relationship, an accountant becomes too sympathetic to the interests of others.

4. Intimidation - These may occur when an accountant may be deterred from acting objectively because of real or perceived threats.

5. Advocacy - These may occur when an accountant promotes a position or opinion (normally of a client) to the point that his/her objectivity may be compromised in the future.

Question 15

Threats and Safeguards to Fundamental Ethical Principles (CH6)

Where can Safeguards against Threats be found?

Answer 15

• legislations or regulations - e.g. Following the GDPR

• The accounting profession - e.g. CPD, Applying the accounting standards

• The business or practice firm- eg. Following organisation’s policies and procedures or code of conduct.

Question 16

Threats and Safeguards to Fundamental Ethical Principles (CH6)

Which Principles can be threatened by Self-Interest?

Answer 16

All of them.

Question 17

Threats and Safeguards to Fundamental Ethical Principles (CH6)

Which Principles can be threatened by Self-Review?

Answer 17

1. Objectivity
2. Professional Behaviour
3. Professional Competence and Due Care

Question 18

Threats and Safeguards to Fundamental Ethical Principles (CH6)

Which Principles are threatened by Familiarity?

Answer 18

All of them.

Question 19

Threats and Safeguards to Fundamental Ethical Principles (CH6)

Which Principles can be threatened by Intimidation?

Answer 19

1. Integrity
2. Objectivity
3. Confidentiality

Question 20

Threats and Safeguards to Fundamental Ethical Principles (CH6)

Which Principles are threatened by Advocacy?

Answer 20

Objectivity.

Question 21

Threats and Safeguards to Fundamental Ethical Principles (CH6)

Explain the Threat of Self-Interest.

Answer 21

These may occur where a financial or other interest will inappropriately influence the accountant’s judgement or behaviour.

Question 22

Threats and Safeguards to Fundamental Ethical Principles (CH6)

Explain the Threat of Self-Review.

Answer 22

These may occur when an accountant has to re-evaluate a judgement or data that they has previously made.

Question 23

Threats and Safeguards to Fundamental Ethical Principles (CH6)

Explain the Threat of Familiarity.

Answer 23

These may occur when, because of a close or personal relationship, an accountant becomes too sympathetic to the interests of others.

Question 24

Threats and Safeguards to Fundamental Ethical Principles (CH6)

Explain the Threat of Intimidation.

Answer 24

These may occur when an accountant may be deterred from acting objectively because of real or perceived threats.

Question 25

Threats and Safeguards to Fundamental Ethical Principles (CH6)

Explain the Threat of Advocacy.

Answer 25

These may occur when an accountant promotes a position or opinion (normally of a client) to the point that their objectivity may be compromised in the future.