Chapter 4 - Key ethical issues Flashcards
Name the five fundamental principles
Integrity - straight forward and honest
Objectivity - not allow bias, conflict of interest or undue influence to override judgement
Professional competence and due care - IP has duty to maintain professional knowledge
Confidentiality - should not disclose information unless legal or professional duty to disclose
Professional behaviour - IP should comply with relevant laws and regulations and should avoid any action that discredits the profession
Name the five threats to fundamental principles
Self-review threat
Self- interest threat
Advocacy threat
Familiarity threat
Intimidation threat
Explain self review threat
When a previous judgement made by an individual in the practice needs to be re-evaluated by IP. Eg they were an audit client, or individual of firm used to be employed by that company
Explain advocacy threat
When an individual within practice promotes a position or option to the point that subsequent objectivity may be compromised.
eg acting in an advisory capacity for a credit of an entity prior to insolvency appointment of that entity
eg acting as an advocate for a client in litigation prior to insolvency appointment in respect of that client.
Explain self interest threat
Result of financial interest or other interest, eg interest in major creditor, concern about damaging business relationship, concerns about future employment, personal connection with entity or principle of entity
Explain intimidation threat
IP deterred from acting objectively by threats.
eg being threatened to be replaced, pressure to not follow regulation
where IP is an employee rather than a principle of practice and has insufficient control over insolvency appointment
Explain familiarity threat
Close relationships or too sympathetic
eg an individual within practice has a close family relationship with an entity or principle of entity
eg services provided by a regular source
Name some safeguards that can be used to mitigate threats to fundamental principles
Other IP in firm to review
Speak to RPB
Joint appointment with another firm
Change members of the team
Barriers of information
Phone R3
Policies and procedures to implement and monitor quality control of appointment
Seek direction from court
Use experts and assign staff with necessary competencies
Name some examples of conflicts of interest and what safeguards can be put in place if any are identified
Succession appointments
Significant relationship has existed with the entity or someone connected with entity.
An IP has to deal with claims between separate and conflicting interests of entities over whom he is appointed
Safeguards:
Use of separate IPS/staff
Procedures to prevent access to information
Clear guidance for individuals within practice
Use of confidentiality agreements signed by individuals in practice
Seek direction of court
Regular reviews of applications of safeguards.
Can referral fees or commissions be accepted?
No
What threat arising from Marketing an insolvency firm?
Self-interest threat to the compliance with the principle of professional behaviour if services are marketed in a way that are inconsistent with that principle.
Examples of significant professional relationship
Audit work carried out in previous 3 years is considered significant
Whether the fee for the work by the practice is or was significant to the practice
Perception of the relationship - what a reasonable and informed 3rd party would reasonably conclude to be acceptable.
What values is the security/bond that an IP must have?
General bond of £250,000
and
Specific penalty bond based on assets of company, min £5,000 up to maximum of £5,000,000
What are the three main laws/regulations that relate to money laundering?
Money Laundering Regulations 2017
Part 7 Proceeds of Crime Act 2002
S18 and S21A Terrorism Act 2000
Money laundering is conventionally described as being a three stage process, name the three stages:
Placement - where cash is deposited into bank system eg potential purchaser of business wants to pay in cash
Layering - series of transactions designed to disguise the audit trail eg criminal sends cheque to liquidator, its cashed, then turns out wasn;t due so liquidator sends it back, funds now appear to be from legit source.
Integration - whereby the now apparently cleaned funds are invested into a legitimate economy eg criminal acquires a business through office holder using funds that have been laundered
How long should an IP maintain records of client identification and of business relationships?
5 years
When is identification procedures required?
- Entering a business relationship
- Carrying out an occasional transaction
- Where there is suspicion of money laundering or terrorist financing.
- Where there are doubts concerning the validity of previous identification evidence
What is the value for an occasional transaction that required identification procedures?
a transaction amounting to Euro 15,000 or more
What is the value for transactions to be a ‘High Value Dealer’
Activity of dealing with goods whenever a transaction involves accepting a total cash payment of EURO 10,000 in more than one operation or several if they are linked.
Can an appointment be accepted if there has been a significant professional relationship or the IP or firm has carried out audit work in the previous 3 years?
No
Does appointment as investigating account preclude a later appointment as an administrative receiver?
Not usually
Can a receiver accept an appointment as liquidator of a company?
No
Can supervisors and administrators usually accept appointments as liquidation of an insolvent company?
Yes, usually
Can holders of insolvency appointments also act as an auditor of a company/business?
No
Can appointment as liquidator in a MVL be accepted where there accepts a significant professional relationship?
Yes, however must review position as liquidator where MVL is likely to be converted into a CVL.
Can an office holder usually accept an appointment as liquidator if he acted previously as an AR (administrative receiver) or a LPA?
No
Is appointment as a liquidator following a court appointed receivership acceptable
Yes, usually
Is appointment as liquidator in a compulsory winding up acceptable if they have previously acted as administrator or supervisor of CVA
Yes, usually
Can the IP be liquidator following on from appointment as administrator?
Yes, if there is agreement of the creditors prior to appointment
Can payments be made to secure an appointment of liquidator?
No - S164
Bankruptcy and voluntary arrangements - can a supervisor of a voluntary arrangement act as a trustee in relation to the debtor?
Yes, usually
Bankruptcy and voluntary arrangements - can an appointment be accepted where there is a close personal relationship with an individual
No
Bankruptcy and voluntary arrangements - can an appointment be accepted in relation to a company which has a close connection to an individual in respect of whom the office holder is acting?
Yes
Is it acceptable for office holders or staff to acquire directly or indirectly any assets of a company or debtor in relation to which he holds an insolvency appointment?
No
