Chapter 2 Flashcards
the obligation that all members of the accounting professional bodies be straightforward and honest
Integrity
the obligation that all members of the professional bodies not allow their personal feelings or prejudices to influence their professional judgement
Objectivity
the obligation that all members of the accounting professional bodies maintain their knowledge and skill at a required level
Professional competence
the obligation to complete each task thoroughly, document all work, and finish on a timely basis
Due care
the obligation that all members of the professional bodies refrain from disclosing information that is learned as a result of their employment to people outside of their workplace
Confidentiality
the obligation that all members of the professional bodies comply with rules and regulations and ensure that they do not harm the reputation of the profession
Professional behaviour
Specific rules incorporating the principles of professional ethics
Fees and pricing Advertising Contact with predecessor Firm names Professional conduct
Ethical decision-making
Obtain the relevant facts.
Distinguish the ethical issues from the facts.
Determine who is affected by the outcome of the dilemma and how each individual or group is affected.
Identify the likely alternatives available to the person who must resolve the dilemma.
Identify the likely consequence of each alternative.
Decide on the appropriate action.
occurs when a public accountant is involved with financial information
Association
here are three ways in which association can happen:
When the public accountant performs a service or consents to the use of his or her name implying that a service was performed with the information.
When a third party indicates, without the consent of the public accountant, that he or she is associated with the information.
When a third party assumes that the public accountant is associated with the information.
the ability to act with integrity, objectivity, and professional scepticism
Independence
the group that represents the shareholders and oversees the activities of a company and its management
Board of directors
There are two forms of independence
Independence of mind
Independence in appearance
Independence of mind
The ability to act with integrity, objectivity, and professional scepticism. It is the ability to make a decision that is free from bias, personal beliefs, and client pressures. Independence of mind is also referred to as actual independence
Independence in appearance
is the belief that independence of mind has been achieved. It is not enough for an auditor to be independent of mind; they must also be seen as independent. Auditors must consider their actions carefully and ensure that nothing is done to compromise their independence both of mind and in appearance. Independence in appearance is also referred to as perceived independence.
the threat that can occur when an accounting firm or its staff has a financial interest in an assurance client
Self-interest threat
Self-interest threat examples
assurance team members involved in the assurance engagement (and their immediate families) own shares in the client’s business
firm members not involved in the assurance engagement (and their immediate families) own more shares in the client than the minimum number of shares permitted by the relevant governing body
a loan to or from the client outside of normal lending terms
fee dependence, where the fees (from assurance and other services) from one client form a significant proportion of the total fees earned from all assurance clients
a close business relationship with the client, unless the relationship is limited to an immaterial financial interest for the client, the firm member, and the firm.
the threat that can occur when the assurance team needs to form an opinion on their own work or work performed by others in their firm
Self-review threat