Chapter 14 - Codes of professional ethics Flashcards
Is there a legal requirement to have ethics code?
No
Give reasons why the accounting profession needs ethical codes.
Accountants have access to confidential information
Assurance providers claim to give an independent view
The financial community relies on accountants
What are the three sources of ethical guidanance for accounting?
- ICAEW Code
- IESBA Code
- FRC Ethical Standards
ICAEW qualified auditors acting in the UK are subject to which Code of Ethics?
ICAEW qualified auditors acting in the UK are subject to the ICAEW Code and the FRC’s Ethical Standard.
Are ICAEW qualified auditors acting in the UK bound by the IESBA Code of Ethics?
No.
The principles of the IESBA Code are incorporated within the ICAEW code, but ICAEW members are not bound by it directly.
What are the fundamental principles of the IESBA Code?
Integrity
Objectivity
Professional competence and due care
Confidentiality
Professional behaviour
Give five advantages of a framework of principles over a system of ethical rules.
Active consideration and demonstration of conclusion
Broad interpretation of ethical situations
Individual situations covered
Flexible to changing situation
Can incorporate prohibitions
Which statement best describes ethical guidance in the UK?
Ethical guidance is a framework containing a combination of rules and principles the application of which is dependent on the professional judgement of the assurance provider based on the specific circumstances.
What are the two general categories of safeguard identified by the Code?
- Safeguards created by the profession, legislation or regulation
- Safeguards in the work environment
What are six safeguards created by profession, legislation or regulation?
Educational training and experience requirements for entry into the profession
Continuing professional development requirements
Corporate governance regulations
Professional standards
Professional or regulatory monitoring and disciplinary procedures
External review by a legally empowered third party of the reports, returns, communication or information produced by a professional accountant
What are six general sources of threats?
Self-interest
Self-review
Advocacy
Familiarity
Intimidation
Management - doing work that should be carried out by management. such as the design and implementation of IT systems.
What are six examples of safeguards in the work environment?
Involving an additional professional accountant to review the work done or otherwise advise as necessary
Consulting an independent third party, such as a committee of independent directors, a professional regulatory body or another professional accountant
Rotating senior personnel
Discussing ethical issues with those in charge of client governance
Disclosing to those charged with governance the nature of services provided and extent of fees charged
Involving another firm to perform or re-perform part of the engagement
What five sources of threats are identified by both the ICAEW Code and the FRC’s Ethical Standard?
Self-interest
Self-review
Advocacy
Familiarity
Intimidation
Which source of threat is identified by the FRC’s ethical standard only?
Management
Give three reasons why independence and objectivity are important to the assurance profession.
- The public’s expectations of accountants
- Public interest in financial information
- Credibility of published financial information
