Code of Ethics for Professional Accountants Flashcards
Five Fundamental Principles of Ethics that Public Accountants (PA) should comply with
COBID
Confidentiality
Objectivity
Professional Behavior
Integrity
Professional Competence and Due Care
Threats
IFASS
Intimidation Threat
Familiarity Threat
Advocacy Threat
Self-Interest Threat
Self-Review Threat
The threat that a Financial or other interest will inappropriately influence a PA’s judgement or behavior
Self Interest Threat:
*A PA holding a financial interest in, or receiving loan or guarantee from, the employing org.
*Having access to corporate assets for personal use
*A PA being offered a gift or special treatment from supplier of the employing org
*Such as client’s unpaid professional fees balance
Threat that a professional accountant will not appropriately evaluate the results of a previous judgement made
Self Review Threat:
*A PA determining the appropriate accounting treatment for a business combination after performing the feasib study supporting the purchase decision
Threat that a professional accountant will promote a client’s or employing organization’s position to the point that the accountant’s objectivity is compromised
Advocacy Threat:
*PA having the opportunity to manipulate information in a prospectus in order to obtain favorable financing
Threat that due to a long or close relationship with a client, or employing organization, a professional accountant will be too SYMPATHETIC to their interests of too accepting of their work
Familiarity Threat:
*A PA being the responsible for the FS of the employing org when an immediate or close family member employed by the org makes decisions that affect the FQ reporting of the org
*PA having long association with individuals influencing business decisions
Threat that a professional accountant will be DETERRED from acting objectively because of the actual or perceived pressures, including attempts to exercise undue influence over the accountant
Intimidation Threat:
*A PA or immediate or close family member facing the threat of dismissal or replacement over the disagreement about:
-the application of an accounting principle
-the way in which financial information is to be reported
*An individual attempting to influence the decision making process of the PA
Three-step approach of the Conceptual Framework for Threats
Identifying Threats
Evaluate - whether threat is at an acceptable level
Addressing threats -If not in an acceptable level, perform the following:
-Eliminate the circumstances
-Safeguard
-Decline or end - the engagement
Two facets of Independence:
Independence of Mind
Independence of Appearance
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 an exercise objectivity and professional skepticism
Independence of Mind
The AVOIDANCE of facts and CIRMCUMSTANCES 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 of professional skepticism has been compromised
Independence of Appearance
Are firms are required to document Independence for Review and Engagements?
Yes. This is in particular:
1. Nature of the threat and safeguards in place or applied
2. In in an acceptable level, nature of the threat and the rationale for the conclusion
In the event that there is conflict between the Code of Ethics and Specific Laws or regulations, What will prevail??
Laws and Regulations
For audits of financial statements of LISTED ENTITIES, the engagement partner should not issue the auditor’s report until the completion of the?
Engagement Quality Control Review
