Chapter 8 - Accountancy profession

Question 1

What is a profession?

Answer 1

Occupational are/vocation requiring prolonged training and qualification to demonstrate competence

Question 2

What are common features of a profession?

Answer 2

Formal regulatory process
Great degree of autonomy to self regulate
Professional values that set the standard of behavior for members
Co-regulation

Question 3

What is a professional accountant?

Answer 3

Member of the ICAEW

Question 4

What is a professional?

Answer 4

Person who has skill resulting in from a coherent course of study and training based on professional values and continue to develop

Question 5

What is financial reporting?

Answer 5

Provision of financial information about an entity to external users

Question 6

What is assurance?

Answer 6

Expression of opinion/conclusion by a pro accountant in public pracrtice

Question 7

What is the importance of the accountancy profession?

Answer 7

Effective working of capital markets - operate effectively when info is accurate and open
Public interest - third parties rely on the work of accountants

Question 8

What must an accountant demonstrate?

Answer 8

Professional skepticism - critical assessment of information, estimates and explanations
Critical thinking - ability to analyse and evaluate issues objectively and rationally
Professional judgement - application of relevant training and pro knowledge

Question 9

What is the role of accountants to retain sustainability?

Answer 9

Regulation and intervention:
Mandatory reporting requirements
Taxes and tariffs
Compliance audits

Market forces:
Risk management
Strategy
Finance

Question 10

Who are the IFAC?

Answer 10

International Federation of Accountants
Global organisation for accountancy profession
175 members worldwide
Aim to protect public interest by encouraging high quality practices

Question 11

Why is regulation needed?

Answer 11

To protect public interest in situations where the issues are too technically complex sufficient that the public to be reasonably expected to protect their own interests.

Question 12

What should regulation NOT?

Answer 12

Protect vested interests from competitors.
Be for personal gain or satisfy prurient interest.
Be disproportionate to the benefit gained.
Distort competition by imposing extra burden on some but not others

Question 13

Who can enact regulation?

Answer 13

Gov directly via legislation
Separate agencies established by gov
Profession/industry - self regulation
Combo

Question 14

When does self regulation work?

Answer 14

If the regime doesn’t act against public interest
If regulatory guidance is understood and enforced
If members buy in to the process of profession
Works best when there is an oversight mechanism

Question 15

What is an oversight mechanism?

Answer 15

Counters accusations of self interest

Question 16

Who are the FRC?

Answer 16

Financial Reporting Council
Uk’s independent regulator for corporate reporting and governance

Question 17

What are the FRC engaged in?

Answer 17

Setting standards for corporate governance, financial reporting, audit and assurance and actuarial policy
Monitoring the quality of audit and financial reporting in large entities
Regulating the audit profession
Overseeing self regulation
Disciplinary body

Question 18

What are the 2 divisions of the FRC?

Answer 18

Conduct committee - responsible for porfessional oversight, discipiline, corporate reporting review and audit quality review

Codes and Standards division - responsible for actuarial policy, accounting and report policy, audit and assurance and corporate governance

Question 19

What is involved in the regulatory regime for the accountancy profession?

Answer 19

Gov - responsible for legislative elements of regulatory framework
Self regulation by accountancy profession - primary regulatory responsibility for supervision
Oversight mechanism by FRC

Question 20

What does the ICAEW have direct responsibility for?

Answer 20

Entry and education requirements
Eligibility to engage in public practice
Dealing with professional misconduct by its members
Eligibility for the performance of reserved activities under statutory powers delegated by the government
Professional conduct requirements
Dealing with professional misconduct by its members

Question 21

What are the FRC’s 3 main roles regarding audit and accountancy?

Answer 21

Non-statutory oversight of professional accountancy bodies
Statutory oversight of the regulation of statutory auditors by the recognised supervisory bodies
Independent monitoring of the quality of the auditing function through the Audit Quality Review team

Question 22

Does the FRC have statutory powers?

Answer 22

Yes

To recognise and derecognise accountancy bodies