Chapter 11

Question 1

What is a profession?

Answer 1

A profession is a network of strategic alliances across ownership boundaries among practitioners who share a core competence’. A profession has certain characteristics that set it apart from other vocations that require a person to be trained, skilled and competent.

Question 2

What characteristics can a provision have?

Answer 2

• a specialized body of knowledge
• a recognized formal education process for acquiring the requisite specialized knowledge
• a standard of professional qualifications governing admission to the profession
• a standard of conduct governing the relationship of the practitioner with clients, colleagues and the public
• recognition of status
• an acceptance of social responsibility inherent in an occupation endowed with the public interest
• an organization devoted to the advancement of the social obligations of the group.

Question 3

What does a standard of conduct?

Answer 3

A standard of conduct governing the relationship of the practitioner with clients, colleagues and the public is not very specific. Professional accounting bodies have codes of conduct which spell out the ethical obligations accounting professionals must have towards their clients, colleagues and the public.

Question 4

What does the codes of conduct try?

Answer 4

The codes of conduct try to give guidance on what to do in cases where the interests of two or more of these groups conflict.

Question 5

What can you state about a provision?

Answer 5

A profession has an organization devoted to the advancement of the social obligations of the group.

Question 6

How can you interpret the statement about provision?

Answer 6

1. it means that professional accountants must be loyal to the profession and fellow professionals.
2. it means that the organization must set the standards of professional conduct and make sure the members understand and implement them.

Question 7

What does a precision effectively practice?

Answer 7

Professions effectively practise a form of social closure whereby they prevent people from entering a vocation unless they are trained to meet the criteria and are allowed to become members.

Question 8

What is functionalism?

Answer 8

Functionalism argues that professions emerged because they provide an important social function. The audit function is an essential ingredient of financial reporting as a means of corporate governance. The role of accountants in insolvency procedures is important to ensure orderly and fair outcomes.

Question 9

What is interactionism?

Answer 9

Interactionism argues that professions emerged as groups competing with each other for status and economic gains.

Question 10

What is critical perspective?

Answer 10

Critical perspectives often argue that professions emerged to establish structures in society and helped to bestow power on a particular group at the expense of other groups.

Question 11

What is IFAC?

Answer 11

IFAC is the worldwide organization for the accountancy profession. IFAC was founded in 1977 and is headquartered in New York. The organization has 157 member bodies and associates in 123 countries.

Question 12

For what standards is IFAC responsible?

Answer 12

• International Accounting Education Standards Board (IAESB)
• International Auditing and Assurance Standards Board (IAASB)
• International Ethics Standards Board for Accountants (IESBA)
• International Public Sector Accounting Standards Board (IPSASB).

Question 13

Where for is a code of conduct meant?

Answer 13

A code of conduct is meant to provide guidance to the members of professional accounting bodies to make interpretations and judgements in situations where the interests of the client, the employer, the professional accounting body and the public are not clearly aligned or are very much in conflict with one another.

Question 14

What does the code of conduct mean for the public?

Answer 14

For the public to place their trust in the accounting profession, the public must believe that accountants on average behave ethically and make unbiased (that is, not systematically biased) judgements.

Question 15

What is the definition of IFAC?

Answer 15

IFAC ‘is the global organization for the accounting profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies’

Question 16

What are the fundamental principles for IFAC?

Answer 16

• Integrity – a professional accountant should be straightforward and honest in performing professional services.
• Objectivity – a professional accountant should not allow bias, conflict of interest or undue influence of others to override professional or business judgements.
• Professional competence and due care – a professional accountant has a continuing duty to maintain professional knowledge and skill at the level required to ensure that a client or employer receives competent professional service based on current developments. A professional accountant should act diligently and in accordance with applicable technical and professional standards when providing professional services. From the above it is apparent that accountants will need to commit to continuing professional development.
• Confidentiality – a professional accountant should respect the confidentiality of information acquired as a result of professional and business relationships and should not disclose any such information to third parties without proper and specific authority unless there is a legal or professional right or duty to disclose. Confidential information acquired as a result of professional and business relationships should not be used for the personal advantage of the professional accountant or third parties.
• • Professional behaviour – a professional accountant should comply with relevant laws and regulations and should avoid any action that discredits the profession.

Question 17

What is the principal of professional competence?

Answer 17

The principles of professional competence and due care, confidentiality and professional behaviour are more straightforward to understand and apply than the principles of integrity and objectivity.

Question 18

Why is objectivity important?

Answer 18

Objectivity is also important for inspiring public confidence. If accountants are perceived as producing financial information that is systematically biased towards the interests of one group of stakeholders, the other groups of stakeholders and the general public are unlikely to trust the accounting profession to fulfil its functions of preparing and verifying financial reporting and other information.

Question 19

Which code is used when professional accountants need to deal with ethical dilemmas?

Answer 19

The 2018 IESBA Code

Question 20

What does the 2018 IESBA Code recommend to the accountants?

Answer 20

• identifies threats to compliance with the fundamental principles
• evaluates the threats identified
• addresses the threats by eliminating them or reducing them to an acceptable level.

Question 21

What are threats to compliance ethical principles?

Answer 21

• Self-interest – the threat that a financial or other interest will inappropriately influence the professional accountant’s judgement or behaviour.
• Self-review – the threat that a professional accountant will not appropriately re-evaluate a previous judgement made by the same professional accountant or by another person within the same organization on whose judgement the professional accountant needs to rely.
• Advocacy – the threat that a professional accountant promotes a client’s or an employer’s position or opinion to the point that subsequent objectivity may be compromised.
• Familiarity – the threat that due to a long or close relationship with a client or an employer, a professional accountant becomes too sympathetic to their interests or too accepting of their work to remain objective or maintain their integrity.
• Intimidation – the threat that occurs when a professional accountant may be deterred from acting objectively by pressures, actual or perceived, including attempts to exercise under influence over the professional accountant.

Question 22

What is an acceptable threat?

Answer 22

An acceptable threat level is where a reasonably informed third party would conclude that the accountant complies with the fundamental principles. The Code sets out more detailed procedures for accountants in business and accountants in public practice for identifying threats and reducing them to an acceptable level.

Question 23

What does the code?

Answer 23

The Code states that safeguards are actions or other measures that may eliminate such threats or reduce them to an acceptable level. Some safeguards are created by the profession, legislation or regulation. Other safeguards must be created and applied in the workplace.

Question 24

What does safeguards include?

Answer 24

• education, training and experience requirements for entry into the profession
• CPD requirements
• corporate governance regulations for accounting firms
• professional standards (such as those in the code)
• professional or regulatory monitoring and disciplinary procedures
• external review by a legally empowered third party of the reports, communications and returns produced by the professional accountant.

Question 25

What steps does a procedure for conflict follow?

Answer 25

1. 1 Obtaining an understanding of the matter.
2. 2 Identifying the relevant parties involved.
3. 3 Identifying the ethical issues involved.
4. 4 Identifying the fundamental principles that are threatened related to the matter in question.
5. 5 Considering the established internal procedures.
6. 6 Identifying the alternative courses of action.

Question 26

What doe accountants consider with these steps?

Answer 26

Upon consideration of the relevant factors, the professional accountant shall determine the appropriate course of action, weighing the consequences of each alternative course of action.
As a measure of last resort, the professional accountant should be willing to consider their position in the team or organization. Integrity may require the professional accountant to resign.