Chapter 10 - Ethics Flashcards
Q: What are the fundamental principles of ethics?
A: Integrity, Objectivity, Professional competence and due care, Confidentiality, Professional behaviour, Professional scepticism.
Q: What does “Integrity” mean in the context of professional ethics?
A: Act honestly and straightforwardly in all relationships.
Q: What does “Objectivity” mean in professional ethics?
A: Avoid bias and external influence, maintain impartiality.
Q: What is required for “Professional competence and due care”?
A: Maintain knowledge, follow current standards, and act diligently.
Q: What does “Confidentiality” entail in professional ethics?
A: Respect and protect confidential information.
Q: What is meant by “Professional behaviour”?
A: Refrain from actions that could damage the profession’s reputation.
Q: What is “Professional scepticism”?
A: Maintain a questioning mind, alert to potential errors or fraud.
Q: What should a professional do to exercise “Professional competence and due care”?
A: Exercise sound judgment, avoid tasks beyond competence, continuously update professional knowledge, and work diligently.
Q: What are the conditions for disclosing confidential information?
A: Only with proper authority or if legally or professionally required (e.g., money laundering).
Q: What is prohibited regarding the use of confidential information?
A: The information must not be used for personal or third-party benefit.
Q: What are the five main threats to compliance with ethical principles?
A: Self-interest, Self-review, Advocacy, Familiarity, Intimidation.
Q: What is a “Self-interest” threat?
A: Personal financial interests influencing decisions.
Q: What is a “Self-review” threat?
A: Reviewing previous judgments or work, which could influence objectivity.
Q: What is an “Advocacy” threat?
A: Promoting an opinion to the point of losing objectivity.
Q: What is a “Familiarity” threat?
A: Sympathetic bias due to close relationships.
Q: What is an “Intimidation” threat?
A: External pressure causing a loss of objectivity.
Q: What safeguards can be taken against threats to compliance?
A: Education and training, CPD, corporate governance, monitoring, external reviews, and the duty to report ethical breaches.
Q: What steps should be taken during the conflict resolution process?
A: Consider the facts, seek internal advice, and, if unresolved, seek legal or ICAEW advice, possibly withdrawing from the engagement.
Q: What are common sources of conflict of interest in a professional setting?
A: Conflicts between a firm and client, or between two clients managed by the same firm.
Q: What should be done if a conflict of interest is identified?
A: Notify relevant parties, obtain consent to act, or cease acting if consent is refused.
Q: What actions can be taken to safeguard against conflict of interest?
A: Use separate teams, restrict access to information, confidentiality agreements, and regular review of safeguards.
Q: What is “Tax avoidance”?
A: Legal methods to reduce tax liability, though not always aligning with the law’s original intent.
Q: How is “Tax avoidance” treated by the courts?
A: Tax avoidance schemes can be disregarded if they have no commercial purpose other than tax reduction.
Q: What is the difference between “Tax planning” and “Tax avoidance”?
A: Tax planning uses tax legislation as intended to minimize tax (e.g., using marriage allowances), while tax avoidance may exploit loopholes in the law.
Q: What is “Tax evasion”?
A: An illegal method to reduce tax by misleading HMRC, such as suppressing income or submitting false claims.
Q: What are the penalties for tax evasion?
A: Fines, imprisonment up to 14 years for money laundering or up to 5 years for failing to report, and up to 2 years for tipping off.
Q: What constitutes “Money laundering”?
A: Concealing, transferring, or using criminal property, including proceeds of tax evasion.
Q: What regulations must accountants comply with regarding money laundering?
A: Proceeds of Crime Act 2002, Serious Organised Crime and Police Act 2005, and the Money Laundering Regulations 2017.
Q: What are the procedures for anti-money laundering?
A: Register with a supervisory body, appoint a Money Laundering Reporting Officer (MLRO), report suspicious activity, provide staff training, verify clients, and retain documents for 5 years.
Q: When must accountants disclose confidential information?
A: When required under anti-money laundering obligations if they suspect or know about money laundering.
Q: What is prohibited under anti-money laundering regulations?
A: Tipping off the money launderer.
Q: What are the penalties for money laundering offences?
A: Unlimited fines, up to 14 years imprisonment for money laundering, up to 5 years for failing to report, and up to 2 years for tipping off.
