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Audit > Chap 6 Code Of Ethics > Flashcards

Chap 6 Code Of Ethics Flashcards

1
Q

Integrity

A

•Be straightforward and honest
•Not to associate with false reports or information
Disassociate if so.

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2
Q

Objectivity (independence)

A

•Not to compromise judgement because of influence, bias, conflict of interest
•Don’t perform service if judgement may be influenced

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3
Q

Confidentiality

A

Auditor and others working with him
Don’t disclose
Don’t use
It applies to •Ex and prospective client
•Within the firm
•social environment

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4
Q

Exception of confidentiality

A
  1. Authorised by client
  2. Required by law (legal proceeding (judge), Non compliance with laws and regulations disclose to NAB)
  3. 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)
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5
Q

Factors to consider in deciding disclosure

A
  1. Information known and substantiated (verified)
  2. Interest of third parties
  3. Proposed type of communication (oral or written)
  4. Addressee and whether they are appropriate recipients
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6
Q

Application of Code of ethics

A
  1. If law prevents compliance
    •follow law
  2. If compliance will not be in public interest
    •consult with professional/regulatory body
  3. If compliance with one principle conflicts with others
    •consult with other appropriate individuals
    •Apply safeguards
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7
Q

General safeguards

A

Notify firm about interest
Dispose off interest (all or upto immaterial)
Remove relevant member from audit team
Appoint appropriate reviewer

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8
Q

Factors evaluating significance

A

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

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9
Q

Threats

A
  1. Self interest
  2. Familiarity
  3. Self review
  4. Intimidation
  5. Advocacy
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10
Q

Self interest threat?

A

Judgement or behavior of an assurance team member will be inappropriately influenced becoz of financial internet of member (or his relative) in audit client

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11
Q

Familiarity?

A

Assurance team member will be too sympathetic to the interest of client because of long or close relationship

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12
Q

Self review

A

Assurance team member will not appropriately evaluate work performed by himself or his team in separate non assurance engagement

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13
Q

Intimidation

A

Assurance team member is deterred from acting objectivity because of threats, undue influence or pressure

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14
Q

Advocacy

A

Assurance team member will promote client’s position on a matter (to third parties) and comprise his objectivity

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15
Q

Fee less than predecessor auditor

A

Should not quote unless scope and quantum of work is materially different from previous year

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16
Q

Contingent fee means

A

Means based on outcome eg. profit, type of opinion, success of case, or saving in tax

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17
Q

Referral fee or commission
Threat

A

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

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18
Q

Course of action for referral fee threat

A

Disclose the arrangement to client
Obtain advance agreement from client

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19
Q

Business relationship

A
  1. Partnership or joint venture with client
  2. Client obtain goods/other services from team member
20
Q

Threats of Business Relationship

A
  1. Self interest threat
  2. Intimidation threat
21
Q

Business relationship safeguards

A
  1. If insignificant, no action
  2. If significant
    Reduced to insignificant level
    Remove or firm should withdraw
22
Q

Purchase of goods and services (by auditor) Threat

A

Self interest

23
Q

Purchase of goods and services (factors)

A
  1. Whether normal course of business
  2. Whether tendering process were followed
  3. Whether undue favour accepted
  4. Magnitude of transaction
24
Q

Inducement examples

A
  1. Gift
  2. Hospitality
  3. Entertainment
  4. Political or charitable donation (by client to partner)
  5. Appeal to friendship and loyalty (friend request)
  6. Preferential treatment ( PCB k tickets)
25
Q

Inducement threat

A

Self interest threat
Familiarity
Intimidation threat

26
Q

Safeguard (inducement)

A

Significant inducement do not accept
Disclose and documented
If accepted by team then
. Return or reimburse
. Remove form team
. Work should be reviewed

27
Q

Safeguard of purchase of goods and services

A

If threat is significant reduce
Or if past transaction then remove member

28
Q

Listed client is

A

A public interest entity

29
Q

Accounting and book keeping services

A

Self review threat
If client is listed company/public interest entity - Cannot be provided to an audit client

If client is an unlisted company - routine or mechanical procedure can be provided

30
Q

Examples of accounting and book keeping services

A

Recording transaction approved by client
Posting transaction to ledger and trail balance
Preparing f/s based on trial balance and information from client approved records

31
Q

Safeguards of accounting and bookkeeping

A
  1. Use different professionals to perform services
  2. Appoint appropriate reviewer
32
Q

Actual or threatened litigation threat

A

Self interest threat
Intimidation threat

33
Q

Factors evaluating actual or threatened litigation

A

Materiality of litigations
Whether litigation related to prior audit Engagement

34
Q

Safeguards of litigation

A

Remove the individual or refuse the Engagement (if firm involve)
Appoint appropriate reviewer

35
Q

Compensation and evaluation policies
Threat

A

Self interest threat

36
Q

Action/safeguards - Compensation and evaluation policies

A

Revise compensation plan
Remove individual from audit team

37
Q

Tax services- Tax return

A

Do not create any threat

38
Q

Assistance in resolution of tax dispute

A

Threat : self review
Advocacy

39
Q

Tax calculation threat

A

Self review

40
Q

Factors to evaluate tax calc threat

A

Materiality
Nature of client (listed or unlisted)

41
Q

Safeguard of tax calculation

A

Not allowed for listed co
For other case
Separate team
Independent reviewer

42
Q

Assistance in resolution of tax dispute safeguards

A

Not allowed if material
For other case
Separate team
Independent reviewer

43
Q

Aaap bande bhejo

A

Temporary personnel assignment

44
Q

Aap f/s bana kar do

A

Accounting and book keeping

45
Q

Content of Engagement letter

A
  1. The purpose and scope of the audit
  2. Identification of the applicable financial reporting framework
  3. The responsibilities of the auditor
  4. The responsibilities of the magmt
  5. Reference to the expected form and content of report + statement of change
46
Q

Content of Engagement letter

A
  1. Elaboration of scope of audit
  2. Inherent limitation of audit and internal control
  3. Arrangement of planning and perf of audit
  4. Fee or basis of fee
  5. Agreement to inform subsequent event
  6. Expectation to provide written reps and other information
  7. Reference to any other communication/ agreement
  8. Involvement of predecessor auditor, expert, internal auditor, quality control reviewer, component auditor
  9. Providing working papers to other parties

Audit (9 decks)

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