Code of Ethics Flashcards
Who developed the code of ethics?
IESBA (International Ethics Standard Board of Accountants)
What is the distinguishing mark of being a CPA?
responsibility to the public
Code of Ethics only applies to CPA in Public Practice and CPA in Business. True or False?
False (all CPA)
Parts of Code of Ethics
4 Parts
- Part 1 - Compliance with Code, Fundamental Principles, and Conceptual Framework
- Part 2 - Professional Accountants in Business
- Part 3 - Professional Accountants in Public Practice
- Part 4 - International Independence Standards
4A - Independence for Audit & Reviews
4B - Independence for Assurance
Engagements
Part 1 - Compliance with Code, Fundamental
Principles, and Conceptual Framework
Conflict with law
- law prevails, comply with all other parts of the code
Part 1 - Compliance with Code, Fundamental
Principles, and Conceptual Framework
Fundamental Principles (COBID)
Confidentiality
- no disclosure unless required or authorized
- continues EVEN after the END of relationship with client
Objectivity
Professional Behavior
- comply with laws and regulations
- avoid actions that will discredit the profession
Integrity
- straightforward and honest
Professional Competence and Due Care
- 2 stages : Attainment & Maintenance
- Act diligently in applying standards
Part 1 - Compliance with Code, Fundamental
Principles, and Conceptual Framework
Threats to Independence (SISRAFI)
Self-Interest
- Financial or other interest
Self-Review
- Siya rin gumawa ng iaaudit
Advocacy
- Promote the client’s position
Familiarity
- Long or close relationship with client
- Too sympathetic
Intimidation
- Actual or perceived pressure
- Undue influence
Part 1 - Compliance with Code, Fundamental
Principles, and Conceptual Framework
Conceptual Framework (3-Step Approach)
- Identify threats
- Evaluate threats
- Address threats
1. Eliminate
2. Apply safeguards (reduce to acceptable level)
3. Decline or end (last resort)
Receiving gift from clients is prohibited. True or False?
- If the amount of gift is trivial, it is acceptable
Some Notes:
- second opinions
- fee
- custody of client asset
- second opinions → may be a threat
- can quote whatever fee deemed appropriate (should be not so low compared to others)
- don’t take custody of client asset, if permitted
1. separate from own asset
2. account for income
Independence of Minds vs Independence in Appreance
Independence of Mind (own perception)
- The state of mind that permits the expression of a conclusion without being affected by influences that compromise professional judgment, thereby allowing an individual to act with integrity, and exercise objectivity and professional skepticism.
Independence in Appearance (public perception)
- The avoidance of facts and circumstances that are so significant that a reasonable and informed third party would be likely to conclude that a firm’s or an audit or assurance team member’s integrity, objectivity or professional skepticism has been compromised.
Financial Interest
- Direct
- Indirect
Direct
- Material → X
- Immaterial → X
Indirect
- Material → X
- Immaterial → ✓
Loans and Guarantees
- Bank
- Non Bank
Bank
- Material → X
- Immaterial → ✓
Non Bank
- Material → X
- Immaterial → ✓
Contingent and Outstanding Fees are allowed. True or False?
False
Advertising, Solicitation, and Referral Fee are allowed. True or False?
False
Rotation Period
Public Entity vs Non Public Entity
PUBLIC INTEREST ENTITY
- 7 years “time-on period”
- after the time-on period, there’s a “cooling-off” period
1. 5 years - Engagement Partner
2. 3 years - Engagement Quality Control Reviewer (EQCR)
3. 2 years - Other KAP Role
NON PUBLIC INTEREST ENTITY
- determine an appropriate period
