Chapter 15: integrity, objectivity and independence Flashcards
What does integrity tell?
honesty, fair dealing
What does the objectivity tell
mind excluding bias and regard to all considerations
What does the independence tell
freedom from situations and relationships (not lead to to impairing objectivity)
How do you safeguard from Self-interest threat
a) finance interest
b) business interest
c) employment with audit firm and client
d) audior leave to join client
e) close personal and family relationship
f) gifts
g) loans
h) fee independence (non listed client)
i) lowballing
a) not hold financial interest in client
b) not participate business relationship with client
c) no dual employment
d) if auditor join client then firm stop with
e) not work on engagmt
f) not accept gift
g) prohibited
h) if >10% firm fee income (disclose then to ethics partner ) ; if >15% then not work as auditor
i) charge audit fee but document all resources allocated comply with ethics
How do you safeguard with self-review threat?
a) client staff joins audit
b) audit staff complete loan to client
a) not involve in audit for 2 yrs
b) prohibited unless 1) loan for ST; 2) no mgmt position;
How do you safeguard with self-review threat?
e) do tax calc for acc entries in audit client
- non listed clients: allowed with SG: seperate teams, review tax indpt.
- listed: not prepare tax calc.
How do you safeguard with self-review threat?
d) valuation services offered to audi client
- non listed clients not allowed if material and subj. i.e if immaterial then allowd
- listed clients: not allowed if material
How do you safeguard with self-review threat?
c) Acc services offered to audit client
- non listed clients allowed with safeguards
- listed clients not allowed
How do you safeguard with self-review threat?
f) internal audit services offered to audit client
- non-listed: not allowed if sig. reliance on internal audit
otherwise allowed with safeuards (sep. team, partner review) - listed: not provide internal control or risk mgmt
How do you safeguard with familiarity threat?
a) recruitment services provided to audit client
b) close family/personal relationship
c) non listed engagmt partner
d) listed engagmt partner
e) non listed becomes listed:engagmt partner
a) listed: not allowed
b) if close relationship not work on audit
c) review indpt. after 10yrs. or with safeguard (document reason, share to client)
d) rotate off after 5 yrs.
e) considers previous service into account; if already 4yrs served continue for 2yrs
How do you safeguard with advocacy threat?
a) Corp. finance services offered to audit client
b) legal services offered to audit client
c) representing audit client in tax tribunal or court clear tax dispute
a) firm not allowed to promote client share
non listed: other work carried if safeguarded
listed: not allowed if no material effect
b) audit not act as solicitor for legal case
non listed: offer litigation support
listed: not allowed
c) prohibited if material
or if safeguarded (separate teams; advice from external tax)
How do you safeguard with intimidation threat?
a) close family or personal relationship
b) business relationships
c) audit partner leaves to take up employment
d) actual or threatened litigaiton
a) audit employee and client should not be close when audit
b) auditor not participate with client in business
c) firm resgin as auditor; not audit again for 2yrs
d) disclosed with governance at client
How do you safeguard with management threat?
a) non audit services to client where auditor join mgmt role
a) don’t take mgmt role
use engmgt letter to outline duties of mgmt and limit work of mechnical and techincal nature
Which set of frame does the ICAEW code of ethics are to be considered by accountants?
- relevant facts
- relevant parties
- ethical issues involved
- matter related fundamental principle
- internal procedures
- alternative courses of action
What should the accountant do using ICAEW code of ethics in conflicts
- resolve internally
- get adivce from ICAEW
- legal advice
- resignation as last resort
