Ch 2 Audit ethics FUNDAMENTAL ETHICAL PRINCIPLES (A4A) Flashcards
Integrity
Honesty in all business and professional relationships.
Competence and due care
Maintain professional knowledge and skills, and ensure all relevant professional standards are followed, in all professional work undertaken.
Confidentiality
Respect the privacy of information obtained whilst working with clients and do not disclose it to third parties unless there is a legal or professional obligation to do so.
Should not use confidential information for personal gain, or to help other third parties make personal gain.
Confidentiality in more detail
There are a small number of situations where auditors may decide, or may be forced by law, to pass client information to a 3rd Party.
Information must be disclosed if:
= client is suspected of money laundering
= client is suspected of terrorism
= client is suspected of treason
= ACCA is investigating your work
= a court order is obtained requiring you to disclose.
An auditor MAY decide to disclose information if:
= client gives permission
= the auditor feels it is in the public interest to know.
Professional behaviour
Should respect laws and regulations and not do anything that could discredit the accountancy profession.
Objectivity
Those reading an audit report (or any other report from an assurance provider) need to be confident that the audit opinion can be relied upon.
If the auditor is linked to the client in some way, there is a risk that:
= the auditor provides the wrong opinion, either by accident or on purpose
= even if the opinion is correct, people reading the audit report assume that the opinion cannot be trusted.
It is therefore essential that the auditors are INDEPENDENT of their clients – if they are (and they are seen to be) totally separate, then it is less likely that
mistakes are made, and greater trust will exist with those reading the Report.
