Chap 6 Code Of Ethics Flashcards
Integrity
•Be straightforward and honest
•Not to associate with false reports or information
Disassociate if so.
Objectivity (independence)
•Not to compromise judgement because of influence, bias, conflict of interest
•Don’t perform service if judgement may be influenced
Confidentiality
Auditor and others working with him
Don’t disclose
Don’t use
It applies to •Ex and prospective client
•Within the firm
•social environment
Exception of confidentiality
- Authorised by client
- Required by law (legal proceeding (judge), Non compliance with laws and regulations disclose to NAB)
- Professional right/ duty to disclose
•QCR - quality control review (stock count kiya ya nhi ICAP)
•investigation (secp kahe)
•Comply with standard or ethics (lawyer ko batao to review work done)
•Interes in legal proceeding (auditor pe case hojaye)
Factors to consider in deciding disclosure
- Information known and substantiated (verified)
- Interest of third parties
- Proposed type of communication (oral or written)
- Addressee and whether they are appropriate recipients
Application of Code of ethics
- If law prevents compliance
•follow law - If compliance will not be in public interest
•consult with professional/regulatory body - If compliance with one principle conflicts with others
•consult with other appropriate individuals
•Apply safeguards
General safeguards
Notify firm about interest
Dispose off interest (all or upto immaterial)
Remove relevant member from audit team
Appoint appropriate reviewer
Factors evaluating significance
Nature of relationship
Position of individual working at client
Postion of indv in audit team
Materiality of financial interest
Ordinary course of buss
Period/time
Nature of work
Threats
- Self interest
- Familiarity
- Self review
- Intimidation
- Advocacy
Self interest threat?
Judgement or behavior of an assurance team member will be inappropriately influenced becoz of financial internet of member (or his relative) in audit client
Familiarity?
Assurance team member will be too sympathetic to the interest of client because of long or close relationship
Self review
Assurance team member will not appropriately evaluate work performed by himself or his team in separate non assurance engagement
Intimidation
Assurance team member is deterred from acting objectivity because of threats, undue influence or pressure
Advocacy
Assurance team member will promote client’s position on a matter (to third parties) and comprise his objectivity
Fee less than predecessor auditor
Should not quote unless scope and quantum of work is materially different from previous year
Contingent fee means
Means based on outcome eg. profit, type of opinion, success of case, or saving in tax
Referral fee or commission
Threat
Self interest threat to compliance with objectivity and professional competence and due care is created if CA pays or receives referral fee or receives commison
Course of action for referral fee threat
Disclose the arrangement to client
Obtain advance agreement from client