Chapter 9: The Professional Accountant Flashcards
What is a profession?
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
What are some common attributes that distinguish professions from other occupations?
- Formal regulatory process
- Great degree of autonomy
- Professional values (members must adhere to)
- Self-regulation
- Co-regulation (self and government)
What is the accountancy profession concerned with?
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
What is the accountancy profession key to maintaining?
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)
What roles do accountants perform?
- Public practice
- Business (public or private sector)
What is public practice?
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
Where can accountants work in business?
Sectors:
- Commerce
- Industry
- Service
- Public Sector
- Education
- Not for profit (Charity)
What roles can accounts work in within the business sector?
- Transaction recording
- Management accounting
- Financial reporting
- Treasury management
- Administration
- Pensions
What is still expected of accountants within the business sector?
- 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
What are the three basic aspects of the professional accountant’s work?
- Maintaining control and safeguarding aspects
- Financial management
- Financial reporting
What is meant by ‘maintaining control and safeguarding assets’?
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)
What is meant by ‘financial management’?
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)
What is meant by ‘financial reporting’?
The transactions and activities of the business, as represented in its accounting records, must be reported to external stakeholders (SOFP, SPL)
What two principles underlie everything a professional accountant does?
- Professional ethics
- Accounting principles
What are the five professional principles of the ICAEW Code of Ethics?
- Confidentiality
- Integrity
- Objectivity
- Professional Competence and Due Care
- Professional Behaviour
What is meant by ‘Confidentiality’ within the Code of Ethics?
Confidentiality:
- Not disclosing information
- Not using information for personal gain
What is meant by ‘Integrity’ in the Code of Ethics?
Integrity:
- Honest
- Fair
- Truthful
- Straightforward
What is meant by ‘Professional Behaviour’ in the Code of Ethics?
- Comply law/regulations
- Avoid actions discrediting the profession
- Courtesy and consideration
What is meant by ‘Objectivity’ in the Code of Ethics?
Objectivity:
- Being independent of mind
- Unbiased
What is meant by ‘Professional competence and due care’ in the Code of Ethics?
- Possess appropriate knowledge and skill exercise
- Exercise sound and independent judgement
- Act diligently (timely, carefully)
What are the five threats to the principles?
- Self-interest
- Self-review
- Familiarity
- Intimidation
- Advocacy
What are the professional/legislative/regulatory safeguards in place to protect the principles?
- Education/training and CPD
- Corporate governance standards
- External third party reviews (e.g. of reports made by accountant)
- Professional standards
- Disciplinaries
- Recruitment process
What are the work environment safeguards to prevent breaches of principles?
- Quality control/assurance procedures
- Internal codes of conduct
- Company policies
How do you ensure technical competence?
- 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)
What are accountants expected to do?
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
How does the ICAEW regulate its members?
- 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)
Can accountants act as a company secretary?
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
How do accountants deal with legal matters?
Qualified solicitors must be consulted, either employed or in an advisory capacity, to deal with legal matters beyond the accountant’s area of expertise
How do accountants deal with insurance and pensions?
Judgement is required by a professional accountant when to consult on insurance and pension matters with suitably qualified and experienced actuaries and insurance specialists
How do accountants deal with property?
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
In what other areas should an accountant exercise their professional competence?
HR, Procurement and IT are all highly specialised functions, which beyond standard operational considerations a professional accountant should consult specialists for advice and guidance
What new technology must accountants advise on?
- 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
What are some other technological developments that impact audit?
- 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
