Chapter 8 - Accountancy profession Flashcards
What is a profession?
Occupational are/vocation requiring prolonged training and qualification to demonstrate competence
What are common features of a profession?
Formal regulatory process
Great degree of autonomy to self regulate
Professional values that set the standard of behavior for members
Co-regulation
What is a professional accountant?
Member of the ICAEW
What is a professional?
Person who has skill resulting in from a coherent course of study and training based on professional values and continue to develop
What is financial reporting?
Provision of financial information about an entity to external users
What is assurance?
Expression of opinion/conclusion by a pro accountant in public pracrtice
What is the importance of the accountancy profession?
Effective working of capital markets - operate effectively when info is accurate and open
Public interest - third parties rely on the work of accountants
What must an accountant demonstrate?
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
What is the role of accountants to retain sustainability?
Regulation and intervention:
Mandatory reporting requirements
Taxes and tariffs
Compliance audits
Market forces:
Risk management
Strategy
Finance
Who are the IFAC?
International Federation of Accountants
Global organisation for accountancy profession
175 members worldwide
Aim to protect public interest by encouraging high quality practices
Why is regulation needed?
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.
What should regulation NOT?
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
Who can enact regulation?
Gov directly via legislation
Separate agencies established by gov
Profession/industry - self regulation
Combo
When does self regulation work?
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
What is an oversight mechanism?
Counters accusations of self interest
Who are the FRC?
Financial Reporting Council
Uk’s independent regulator for corporate reporting and governance
What are the FRC engaged in?
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
What are the 2 divisions of the FRC?
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
What is involved in the regulatory regime for the accountancy profession?
Gov - responsible for legislative elements of regulatory framework
Self regulation by accountancy profession - primary regulatory responsibility for supervision
Oversight mechanism by FRC
What does the ICAEW have direct responsibility for?
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
What are the FRC’s 3 main roles regarding audit and accountancy?
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
Does the FRC have statutory powers?
Yes
To recognise and derecognise accountancy bodies
