9. Professional Ethics

Question 1

Sources of ethical guidance

Answer 1

1. IFAC/IESBA code
2. ICAEW code
3. FRC standard

Question 2

OBT: IESBA fundamental principles

Answer 2

1. Integrity
2. Objectivity
3. Professional competence and due care
4. Confidentiality
5. Professional behavior

Question 3

IESBA general threats to objectivity and independence

Answer 3

1. Self-interest
2. Self-review
3. Advocacy
4. Familiarity
5. Intimidation

Question 4

Extra threat identified in the FRC standard?

Answer 4

Management

Question 5

How to apply ethics to sustainability

Answer 5

Disclosures: Scepticism (‘greenwashing’)

Question 6

Climate disclosure methodology

Answer 6

TCFD

Question 7

TCFD climate disclosures approach

Answer 7

‘comply or explain’

Question 8

TCFD issue

Answer 8

Many companies exempt

Question 9

Are TCFD disclosures necessary?

Answer 9

No

Not yet

Question 10

FRC standard: Covered person: Definition

Answer 10

Partners and staff involved in the engagement,

Could also be:
Any other person placed at the disposal of the audit team
e.g.
Expert
Supervisory, management or other
oversight responsibility for the partners
Position to influence the conduct or outcome

Question 11

FRC Standard: PIE

Answer 11

Public interest entity
(Mainly listed clients)

OBT: permitted services list
(For PIEs also audit clients)

Question 12

FRC Standard: What should be used when considering whether the requirements of the Ethical standard have been met?

Answer 12

Third party test

Evaluation should be made with reference to the perspective of an objective, reasonable and informed third party

To be, and be seen to be, independent

(An informed investor or public interest stakeholder’s perspective with diversity of thought is required for the third party test)

Question 13

FRC standard: Process for providing non-audit services for non-PIE audit clients?

Answer 13

1. Evaluate ethical threats
2. Apply safeguards
3. If can’t, withdraw from engagement

Question 14

FRC Standard: Specific non-audit services

Answer 14

1. Audit related services
   (The threats are insignificant when work very similar to the audit is carried out by the
   engagement team so no safeguards are required)
2. Internal audit services
   Prohibited for ANY audit client
   (Difference to IESBA code)

Question 15

FRC standard: Relaxation for audits of small entities: Applies to who?

Answer 15

Small per CA

Question 16

ICAEW code: What is covered?

Answer 16

1. Independence
2. Objectivity
3. Confidentiality
4. Conflicts of interest

(Contents generally same as FRC standard)

Question 17

ICAEW code: What is covered?

Answer 17

1. Independence
2. Objectivity
3. Confidentiality
4. Conflicts of interest

(Contents generally same as FRC standard)

Question 18

Is it improper for an accountant to have 2 clients whose interests conflict?

Answer 18

NO
(indeed firms often specialize in sectors)

Question 19

ICEAW Code: What to do if there is a COI?

Answer 19

Seek consent from both clients to continue to act

Apply safeguards:
1. separate teams
2. information barriers
3. confidentiality agreements signed by employees and partners
4. review of the application of safeguards by an independent partner

Question 20

ICAEW Code: Social media: Key benefits

Answer 20

1. Sharing of experiences
2. Creating engagement in debates
3. Raising awareness/profiles.

Question 21

ICAEW Code: Social media: Key issues

Answer 21

1. confidentiality breaches
2. criticism (always avoid)
3. lack of integrity/professional behaviour
4. offensive posts (and sometimes language)
5. illegal acts.