CHAP 15: INTERGRITY,OBJECTIVITY,INDEPENDENCE

Question 1

what is underpin for objectivity?

Answer 1

Independence: It is related to and underpins objectivity – it is freedom from situations and relationships that make it probable that a reasonable and informed third party would conclude that objectivity

Question 2

Phân biệt objectivity and independence

Answer 2

Objectivity is accountant mind
Independence is curcumstance surrounding financial,employment, business and personal relationship ảnh hưởng đến việc assurance provider connect vs khách

Question 3

Why independence and objectivity matter so much?

Answer 3

1, The expectation of those directly effect, particularly the member of company ( shareholder), audit provide the objective assurance that director kbh provide trên FS
2, Public interest

Question 4

How to đối mặt với các threat mà đe dọa tới tính objectivity

Answer 4

Đánh giá tính significant, nếu được thì dùng safeguard, nếu safeguard k đủ đảm bảo thì withdraw khỏi engagement

Question 5

Tại sao auditor nên cân nhắc kĩ lưỡng nếu threat chỉ là slightest

Answer 5

• Clients may lose an auditor who knows their business.
• It denies clients the freedom to be advised by the accountant of their choice.

Question 6

Acting with intergrity nghĩa là auditor k được associated with information nào

Answer 6

Acting with integrity means not knowingly being associated with
information that:
a) contains a materially false or misleading statement;
b) contains statements or information furnished recklessly; or
c) omits or obscures information required to be included where such
omission or obscurity would be misleading.

Question 7

Public interest entity

Answer 7

 Definition
* A listed entity
* An entity (a) defined by regulation or legislation as a public interest entity or (b) for which the audit is required by regulation or legislation to be conducted in
compliance with the same independence requirements that apply to the audit of listed entities.
 Entities may be categorised as either public interest entities or nonpublic interest entities. Generally speaking, stricter standards will
apply to public interest entities because their audits are more
important to the public.

Question 8

Những dịch vụ mà audit firm k được cung cấp cho public interest entity

Answer 8

1,Dvu lquan đến thuế
-Cbi tax form,payroll tax,custom duties( thuế hải quan)
-Xác định các khoản public subsidies,tax incentives,tax inspection trừ khi là được yêu cầu bởi luật)
-Tính direct,indirect,deferred tax
-cung cấp tax advice
2,Dvu lquan đến management và đưa ra quyết định của audited entity
3,Bookeeping, cbi accounting record on FS
4,Dvu payroll
5,Design internal control,risk management procedure
6,Dvu valuation( actuarial and litigation support services)
7,Legal service
- General counsel(tư vấn chung), negotiating hộ audited entity,acting in advocacy để giải quyết litigation hộ
8, Dvu internal audit
9,Dvu financing,capital structure and allocation,investment strategy
10,promoting,dealing,
underwriting shares hộ audited entity
11,Human resources service
-Giúp audited entity quản lý, tìm ứng viên,tuyển dụng ứng viên các vtri lquan đến accounting record và lập FS
-Structuring entity design và cost control

Question 9

12 nguyên nhân dẫn đến self-interest threat

Answer 9

1,financial interest
2,close business relationship
3,employment with assurance client
4,partner on client board
5,family and personal relationships
6,gift and hospitality
7,loans and guarantees
8,overdue fee
9,percentage or contigent fee
10,high percentage of fee
11,lowballing
12,loan staff assignment

Question 10

Financial interest là j? Ai là người k được own financial interest?

Answer 10

• Financial interest là khi người đó được hưởng các direct hoặc indirect financial interest của cty client như interest về equity,security,debebture,loans,các investment vehicle,estate mà qua đó người sở hữu có thể có quyền ảnh hưởng đến các quyết định đầu tư hoặc k
• Người k được owm financial interest
• The assurance firm
• Any partner in the assurance firm
• Any person in a position to influence the conduct and outcome of the
  engagement
• An immediate family member of such a person

Question 11

Các safeguard của financial interest để ngăn chặn self interest threat

Answer 11

• Disposing of the interest
• Removing the individual from the team if required
• Keeping the client’s audit committee informed of the situation
• Using an engagement quality control reviewer to review work carried out if necessary

Question 12

1 team assurance gồm những ai

Answer 12

1, các thành viên thực hiện engagement
2, những người trong fim có ảnh hưởng trực tiếp đến outcome của engagement(partner)

Question 13

Assurance firm phải làm j để ktra xem staff có immediate family ở trong client ?

Answer 13

Quality management yêu cầu các staff phải disclose về themselves và immediate family trên cơ sở xây dựng văn hóa tự nguyện

Question 14

Close business relationship gây ra những threat nào? Ví dụ? Safeguard cho ngnhan này?

Answer 14

• A close business relationship will involve a common commercial
  interest.
   Threats:
• Self-interest threat
• Advocacy threat, or
• Intimidation threat
   Ví dụ
• operating a joint venture giữa firm và client hoặc giữa firm với director,manager của client
  -firm vs client combine sp 2 bên để quảng bá cho nhau
  -firm marketing cho sp client hoặc ngược lại
  -firm thuê văn phòng client
   Safeguard
• end the assurance provision or
• terminate the (other) business relationship.
• If an individual member of an assurance team had such an interest, he should be removed from the assurance team.

Question 15

Business relationship ntn thì client vs firm có thể cùng nhau join mà không gây ra threat?

Answer 15

-The business mà financial interest là immaterial và mqh giữa firm và client là insignificant( vd firm thuê văn phòng ở 1 công ty chuyên cho thuê văn phòng, và diện tích thuê của firm là rất nhỏ)
-Purchasing g&s của client in ordinary course of business on arm length basis với number of transaction ở 1 lượng vừa phải chứ nếu là substantial number transaction thì cần phải có safeguard vì nó đe dọa tính independence r
-Ngoài TH này ra thì tốt nhất là firm k nên tham gia venture nào với client

Question 16

Employment with assurance client gây ra những threat nào? ví dụ

Answer 16

 Dual employment (the same person being employed by both an
assurance firm and a client) is not permitted.
 Both situation are a threat independence:
* Assurance team member might be motivated by a desire to impress a
future possible employer (objectivity is therefore affected).
* A former partner turned Finance Director has too much knowledge of
the firm’s systems and procedures.
 Threats:
* Self-review threat
* Intimidation threat
* Familiarity threats
 Factors affecting the threat to independence:
* The role of individual has taken up at the client
* The extent of his influence on the assurance service previously
* The length of time that has passed between the individual’s connection
with the assurance service and the new role at the client.

Question 17

Safeguard của employment with client( chỉ áp dụng đối với member of audit team)

Answer 17

• Modifying the assurance strategy
• Ensuring the assurance engagement is assigned to someone of sufficient
  experience as compared with the individual who has left
• Involving an additional professional accountant not involved with the
  engagement to review the work done
• Carrying out a quality control review of the engagement

Question 18

Safeguard của employment with client với TH partner của firm rời sang client

Answer 18

• Significant threat to objectivity if the partner of audit firm accepts a
  key management position at a client of the firm
   FRC Ethical Standard (section 2):
• A partner leaves the firm and is appointed as a director or to a key
  management position with an audit client in the previous two years, the firmshould resign as auditors.
• The auditors should not reaccept appointment until two years have elapsedsince that partner’s involvement in the audit or the former partner leaves the
  audit client, if earlier.
• When any other former member of an engagement team joins an audit client
  as director/key management within two years of being involved with the
  audit, the firm should consider the composition of the audit team.

Question 19

Những việc firm cần làm khi staff rời sang client

Answer 19

FRC Ethical Standard (section 2) (cont.):
* An individual who has moved from the firm to a client should not be entitled to any benefits or payments from the firm unless these are made in accordance with pre-determined arrangements.( kiểu vd khi ký hợp đồng firm đồng ý cho staff tiền học acca mà chưa học xog staff rời đi thì firm vẫn phải tài trợ nốt tiền ý)
* A firm should have quality control procedures setting out that an individual involved in serious employment negotiations with an audit client should
notify the firm and that this person would then be removed from the
engagement. * Review of the employee’s work on the current and most recent audit should take place vì nhiều khi nó sắp rời đi nên nó làm ẩu.

Question 20

partner/employee on client board gây ra threat j?

Answer 20

 A partner or employee of an assurance firm should not serve on the
board of an assurance client.
 Threats: Self – review and/or management threat
 It may be acceptable for a partner or an employee of an assurance
firm to perform the role of company secretary for an assurance client,
if the role is essentially administrative

Question 21

family &personal relationship ảnh hưởng đến independence ntn?

Answer 21

 Factors affecting seriously threaten independence such as:
* the individual’s responsibilities on the assurance engagement
* the closeness of the relationship
* the role of the other party at the assurance client
* When an immediate family member of a member of the assurance team is a
director, an officer or an employee of the assurance client in a position to exert
significant influence over the subject matter information of the assurance
engagement, the individual should be removed from the assurance team.

Question 22

Nếu employee mà k nằm trong assurance team có close famlily hoặc personal relationship with director ,officer,employee của client thì có cần có biện pháp j k

Answer 22

K có biện pháp nào những firm vẫn nên cân nhắc xem có threat đến independence k

Question 23

Các safeguard của family and personal relationship hi firm inadvertently violate( vô tình vi phạm) rules

Answer 23

• Undertake a quality control review of the assurance engagement
• Discuss the matter with the audit committee of the client

Question 24

Gifts and hospitality

Answer 24

 Unless the value of gifts or hospitality are such that a reasonableand
informed third party, weighing all the specific facts and circumstances,
would consider them trivial and inconsequential, a firm or a member of an assurance team should not accept them
 FRC ES (section 4) prohibit to immediate family members or persons able to influence the audit and states that hospitality should not be accepted from an audit client unless it is reasonable in terms of its frequency, nature and cost.

Question 25

Loans and guarantees ( dang dở)

Answer 25

 Audit firms, member of audit team or immediate member family must not make/guarantee a loan to a client, or accept a loan from a client trừ khi khoản loans/guarantees đấy là immaterial với cả 2 bên.
 Một TH ngoại lệ là audit firms, member of audit team or immediate member family có thể deposit hoặc loans/guarantees với client là bank miễn là giao dịch đấy theo ordinary course of business và có safeguard kèm theo*****

Question 26

Overdue fees

Answer 26

Khách hoàn nợ phí kiểm toán
 The ICAEW Code states that the payment of overdue fees should be required before the assurance report for the following year can be issued.
 Safeguard:
* guarding against fees building up by discussing the issues with those charged with governance (more specifically, the audit committee),
* if necessary, the possibility of resigning if overdue fees are not paid

Question 27

Contingent fee

Answer 27

A fee calculated on a predetermined basis
relating to the outcome of a transaction or the result of the services
performed by the firm.
 A firm shall not enter into any arrangement for an assurance engagement under which the amount of the fee is contingent on the result of the
assurance work or on items of subject matter of the assurance engagement.  Note: A fee that is established by a court or other public authority is nota contingent fee.

Question 28

High percentage of fee là j? Safeguard khi xảy ra tình huống này?

Answer 28

 A firm should be alert where the total fees generated by an assurance client represent a large proportion of a firm’s total fees.
 Total fees = Audit and non-audit services fees
 Safeguards
* discussing the issues with the audit committee
* taking steps to reduce the dependency on the client
* obtaining external/internal quality control reviews
* consulting a third party such as ICAEW

Question 29

ICAEW Code quy định ntn về assurance fee( audit&non audit service)

Answer 29

 For two consecutive years, the total fees (public interest entity) >
15% of total fees received by the firm, the firm shall:
* disclose this fact to those charged with governance of the audit client
* carry out an engagement quality control review of the second year
engagement, either a “pre-issuance review” or a “post-issuance review’’

Question 30

Quy định của FRC về assurance fee( audit&non audit service)

Answer 30

Non- Listed company:
- total fee<10%anuual income: accept engagement
-10% AI<total fees<15%AI : accept with safeguard
-15% AI<total fee: resign engagement
Listed company:
- total fee<5%anuual income: accept engagement
-5% AI<total fees<10%AI : accept with safeguard
-10% AI<total fee: resign engagement

 Safeguard:
* The audit engagement partners should disclose that fact to the ethics partner and those charged with governance of the audit client.
* For non-listed companies, an external independent quality control review of the engagement should be undertaken before the report is signed.
* For listed clients, reduce non-audit work provided.
 For public-interest (listed) entities, total fees from non-audit services must not exceed 70% of the audit fee (or rather, of the average audit fee over the last three years).

Question 31

Lowballing

Answer 31

 When a firm quotes a significantly lower fee level for an assurance service than would have been charged by the predecessor firm Threats: significant self-interest threat.
 Safeguards
* maintaining records such that the firm is able to demonstrate that appropriate staff and time are spent on the engagement
* complying with all applicable assurance standards, guidelines and quality
control procedures

Question 32

Các quy định của FRC đối với lowballing

Answer 32

The FRC Ethical Standard (section 4)
 The engagement partner shall be satisfied and able to demonstratethat the audit engagement has assigned to it sufficient partners and staff with
appropriate time and skill to perform the audit in accordance with all
applicable Auditing and Ethical Standards, irrespective of the audit fee to be charged. (FRC ES, Part B4: para 4.1)
 The audit engagement partner should ensure audit fees are not influenced or determined by the provision of non-audit service to the audited entity. Total non-audit fees must be no more than 70% of the average audit fee from the last three years.

Question 33

Loan staff asignment

Answer 33

bị cấm trong mọi trường hợp, firm chỉ được cho client mượn nvien để support cho hđ administrative chứ k dk cho nvien hoạt động như thế thành viên của cty client

Question 34

8 nguyên nhân gây ra self-review threat

Answer 34

1, Service with assurance client
2,Preparing accounting record and FS
3,Valuation service
4,Tax service
5,Internal audit service
6,Coporate finance
7,Information technology service
8,Litigation support service