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Business, Technology and Finance > Chapter 9: The Professional Accountant > Flashcards

Chapter 9: The Professional Accountant Flashcards

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1
Q

What is a profession?

A

An occupational area characterised by:

  • the mastering of specialised skills during a period of training
  • governance by a professional association
  • compliance with an ethical code
  • a process of certification before being allowed to practise
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2
Q

What are some common attributes that distinguish professions from other occupations?

A
  • Formal regulatory process
  • Great degree of autonomy
  • Professional values (members must adhere to)
  • Self-regulation
  • Co-regulation (self and government)
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3
Q

What is the accountancy profession concerned with?

A

The accountancy profession is concerned with the measurement disclosure or provision of assurance about financial information that helps managers, investors, tax authorities and other decision makers make resource allocation decisions

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4
Q

What is the accountancy profession key to maintaining?

A

The accountancy profession is key to maintaining the effective working of capital markets and upholding the public interest (via ensuring public confidence in financial reporting and auditing)

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5
Q

What roles do accountants perform?

A
  • Public practice

- Business (public or private sector)

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6
Q

What is public practice?

A

Public practice: firm of accountants providing services

Reserved areas:

  • insolvency
  • investment business
  • audit and assurance
  • probate

Other accountancy areas:

  • Accounting
  • Taxation
  • Corporate Finance
  • ICT
  • Management Consultancy
  • Forensic Accounting
  • Financial Management
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7
Q

Where can accountants work in business?

A

Sectors:

  • Commerce
  • Industry
  • Service
  • Public Sector
  • Education
  • Not for profit (Charity)
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8
Q

What roles can accounts work in within the business sector?

A
  • Transaction recording
  • Management accounting
  • Financial reporting
  • Treasury management
  • Administration
  • Pensions
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9
Q

What is still expected of accountants within the business sector?

A
  • Still expected to uphold professional principles - particularly professional competence and due care
  • Accountants need to be able to form reasoned judgements in all work they do even if they are using work of other professionals - e.g. company secretary, chartered surveyor, HR professionals, IT specialists etc
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10
Q

What are the three basic aspects of the professional accountant’s work?

A
  • Maintaining control and safeguarding aspects
  • Financial management
  • Financial reporting
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11
Q

What is meant by ‘maintaining control and safeguarding assets’?

A

The professional accountant will seek to ensure that assets are kept safe through complete, timely, and accurate recording of transactions (includes internal controls such as an audit committee)

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12
Q

What is meant by ‘financial management’?

A

The management of all the processes associated with the raising and use of financial resources in a business (recording transactions, debt and equity - supports good corporate governance)

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13
Q

What is meant by ‘financial reporting’?

A

The transactions and activities of the business, as represented in its accounting records, must be reported to external stakeholders (SOFP, SPL)

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14
Q

What two principles underlie everything a professional accountant does?

A
  • Professional ethics

- Accounting principles

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15
Q

What are the five professional principles of the ICAEW Code of Ethics?

A
  • Confidentiality
  • Integrity
  • Objectivity
  • Professional Competence and Due Care
  • Professional Behaviour
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16
Q

What is meant by ‘Confidentiality’ within the Code of Ethics?

A

Confidentiality:

  • Not disclosing information
  • Not using information for personal gain
17
Q

What is meant by ‘Integrity’ in the Code of Ethics?

A

Integrity:

  • Honest
  • Fair
  • Truthful
  • Straightforward
18
Q

What is meant by ‘Professional Behaviour’ in the Code of Ethics?

A
  • Comply law/regulations
  • Avoid actions discrediting the profession
  • Courtesy and consideration
19
Q

What is meant by ‘Objectivity’ in the Code of Ethics?

A

Objectivity:

  • Being independent of mind
  • Unbiased
20
Q

What is meant by ‘Professional competence and due care’ in the Code of Ethics?

A
  • Possess appropriate knowledge and skill exercise
  • Exercise sound and independent judgement
  • Act diligently (timely, carefully)
21
Q

What are the five threats to the principles?

A
  • Self-interest
  • Self-review
  • Familiarity
  • Intimidation
  • Advocacy
22
Q

What are the professional/legislative/regulatory safeguards in place to protect the principles?

A
  • Education/training and CPD
  • Corporate governance standards
  • External third party reviews (e.g. of reports made by accountant)
  • Professional standards
  • Disciplinaries
  • Recruitment process
23
Q

What are the work environment safeguards to prevent breaches of principles?

A
  • Quality control/assurance procedures
  • Internal codes of conduct
  • Company policies
24
Q

How do you ensure technical competence?

A
  • Training and education requirements for admission to ICAEW
  • Requirements for ongoing membership (continuing professional development (CPD)); and for public practice members (certificate, code of ethics)
  • If practising in a reserved area - ICAEW has regulatory powers over members (eligibility, conduct, competence)
25
Q

What are accountants expected to do?

A

Public’s trust of accountants is crucial.

Expected to:

  • uphold the ICAEW Code of Ethics
  • be able to identify likely threats to their principles and
  • be able to safeguard against those threats
26
Q

How does the ICAEW regulate its members?

A
  • Entry/education requirements
  • Additional requirements for those practising audit, investment business and insolvency work (reserved areas)
  • Professional indemnity insurance (PII) required for those in public practice
  • Rigorous complaints investigation procedures and
  • ICAEW is overseen itself by the Financial Reporting Council (FRC)
27
Q

Can accountants act as a company secretary?

A

Chartered accountants can act as company secretary, but in large, complex organizations, a chartered secretary will typically be employed to ensure the right skill set is available and to promote sound corporate governance

28
Q

How do accountants deal with legal matters?

A

Qualified solicitors must be consulted, either employed or in an advisory capacity, to deal with legal matters beyond the accountant’s area of expertise

29
Q

How do accountants deal with insurance and pensions?

A

Judgement is required by a professional accountant when to consult on insurance and pension matters with suitably qualified and experienced actuaries and insurance specialists

30
Q

How do accountants deal with property?

A

Areas such as valuation, negotiation, tax and appraisal of property can typically be handled by a professional accountant. However, as required architects, estate agents, lawyers, and surveyors should be consulted

31
Q

In what other areas should an accountant exercise their professional competence?

A

HR, Procurement and IT are all highly specialised functions, which beyond standard operational considerations a professional accountant should consult specialists for advice and guidance

32
Q

What new technology must accountants advise on?

A
  • New types of goods and services: Accountants must be able to advise on things like the treatment of new revenue streams and digital assets
  • Regulation: Understanding and advising on complex regulation relating to data and technology as well as being aware of the risk of breaches
  • Systems advice: Advisory work for clients evaluating the merits of potential new systems and technology
  • Software controls: validating the adequacy of internal controls is a fundamental part of audit assignments
33
Q

What are some other technological developments that impact audit?

A
  • Automation: Maintenance of ledgers and preparation of reconciliations is now largely automated
  • Transparency in recording: Distributed ledger technology is transforming the way transactions are recorded, increasing transparency
  • Smart contracts: can be audited when created as they are secure once established and automatically execute
  • Data analytics: Analytics can target risk and improve the relevance and efficiency of audit work

Business, Technology and Finance (15 decks)

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