Chapter 9 The professional accountant

Question 1

1.1 What is a profession

Answer 1

A profession is considered an occupational area, that involves prolonged training leading to a formal qualification. Considered by the characteristics of mastering specialised skills during training, governance by an association, compliance with ethical code and process of certification. Common attributes include formal regulatory process, degree of autonomy, professional values, self-regulation, and co-regulation.

Question 2

1.2 The importance of the accountancy profession

Answer 2

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. The accountancy profession is key to maintaining effective working of capital markets and upholding the public interest.

Question 3

2.1 Roles of the professional accountant

Answer 3

Accountants can be categorised as working in public practice or business. Public practice is a firm of accountants providing services in reserved areas (insolvency, investment business, audit, and assurance) and other areas (like taxation, corporate finance, and financial management).
Accountants in business are in sectors and have roles like transaction recording, management accounting and financial reporting.

Question 4

2.3 Work undertaken by the profession

Answer 4

There are three basic aspects of the accountant’s work:
- Maintaining control and safeguarding assets (through timely and accurate recording of transactions)
- Financial management (management of all processed with the raising and use of financial resources)
- Financial reporting (transactions of the business represented in accounting records reported to external stakeholders)

Question 5

3.1 Professional ethics

Answer 5

The professional principles in the ICAEW code of ethics are confidentiality, objectivity (independent of mind unbiased), professional competence and due care (appropriate knowledge and skill and independent judgement), professional behaviour (comply with law and regulations) and integrity (act honest, fair, and truthful).

Question 6

3.2 Threats to professional principals

Answer 6

Principles can be threatened by self-interest, self-review, familiarity, intimidation, and advocacy. The safeguards to prevent and detect unethical behaviour include education and training and CPD, corporate governance standards, external third party reviews (e.g., reports made by accountant) and professional standards. Work environment safeguards include quality control/assurance procedures and internal codes of conduct.

Question 7

3.3 Technical competence

Answer 7

Technical competence is ensured through training and education requirements to admission to ICAEW, requirements for ongoing membership (CPD and PII for public practice members) and if practicing in a reserved area the ICAEW has regulatory powers over members (eligibility, conduct and competence).

Question 8

3.4 Professional responsibility

Answer 8

Accountants are expected to uphold the ICAEW code of ethics, be able to identify threats to their principals and safeguard against those threats. The ICAEW regulates its own members by entry/education requirements, additional requirements for practising audit, investment business and insolvency work, professional indemnity insurance (PII) required in public practice, rigorous complaints investigation procedures and ICAEW is overseen by the financial reporting council.

Question 9

4.1 Limits of accountant’s responsibilities

Answer 9

Accountants are engaged in many areas of business management but must be mindful of the limits of their competence and acknowledge when to seek expertise and advice:
- Company secretarial: a chartered secretary is typically employed to ensure the right skill set is available and to promote sound corporate governance
- Legal matters: solicitors must be consulted
- Insurance and pensions: judgement required on whether to consult with actuaries and insurance specialists
- Property: valuation, negotiation, tax, and appraisal of property can be handled by an accountant. But architects, estate agents, lawyers and surveyors should be consulted
- Other areas: HR, procurement and IT are specialised functions beyond operational considerations of an accountant