Codes of professional ethics and regulatory issues Flashcards
Is there a legal requirement to have ethics code?
No
Give reasons why the accounting profession needs ethical codes.
Accountants have access to confidential information
Assurance providers claim to give an independent view
The financial community relies on accountants
ICAEW qualified auditors acting in the UK are subject to which Code of Ethics?
ICAEW qualified auditors acting in the UK are subject to the ICAEW Code and the FRC’s Ethical Standard.
Are ICAEW qualified auditors acting in the UK bound by the IESBA Code of Ethics?
No.
The principles of the IESBA Code are incorporated within the ICAEW code, but ICAEW members are not bound by it directly.
principles based guidance
- Encourages the accountant to use judgement
- Requires compliance with the spirit of the guidance
- Flexible so can be applied to new unusual or rapidly changing situations
- Can still incorporate rules where necessary
rules based guidance
- may be easier to follow because it is objective
- needs frequent updating to ensure the guidance applies to new situations
- may encourage accounts to interpret requirements narrowly in order to get round the spirit of requirements
what is the IFAC code
the IFAC code is issued by the international ethics standard board for accountants (IESBA). IESBA is IFAC’s ethics board. IESBA applies to all professional accountants
What are the fundamental principles of the IESBA Code?
Integrity
Objectivity
Professional competence and due care
Confidentiality
Professional behaviour
independance
- assurance providers should be, and seen to be independant
independence of mind
The state of mind that permits the expression of a conclusion without being affected by influences that compromise professional judgment.
independence in appearance
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 member’s, integrity, objectivity or professional scepticism has been compromised.
What are the three steps regarding the purpose of the IESBA code?
- Identify threats
- Evaluate the threats identified
- Address the threats: Eliminate, reduce. apply safeguards.
Which bodies issues ethical guidance.
ICAEW
IESBA
FRC
(IAASB issues ISAs but not ethical guidance)
Which statement best describes ethical guidance in the UK?
Ethical guidance is a framework containing a combination of rules and principles the application of which is dependent on the professional judgement of the assurance provider based on the specific circumstances.
What five sources of threats are identified by both the ICAEW Code and the FRC’s Ethical Standard?
Self-interest
Self-review
Advocacy
Familiarity
Intimidation
Which source of threat is identified by the FRC’s ethical standard only?
Management - doing work that should be carried out by management. such as the design and implementation of IT systems.
What are six safeguards created by profession, legislation or regulation?
- Education and training
- Continuing professional development requirements
- Corporate governance regulations
- Professional standards
- Monitoring of professional work including disciplinary proceedings
- External reviews
Give three reasons why independence and objectivity are important to the assurance profession.
- The public’s expectations of accountants
- Public interest in financial information
- Credibility of published financial information
Does a principles-based code requires a professional accountant to comply with a set of specific rules.?
no
Does a rules-based code requires a professional accountant to identify, evaluate and address threats to compliance with fundamental ethical principles?
no
Does the ICAEW use a rules-based approach?
No, the ICAEW uses a principles-based approach,
Can principles-based guidance contain rules?
yes
If guidance is principles-based, does it allow for particular or unique situations?
yes
Can principles-based guidance permit multiple correct responses in a given situation?
yes
A management threat
is where the auditors find themselves in the shoes of the management. The work that belongs to the management is being requested to be done by the auditor e.g. making decisions in a board meeting. (applies to UK auditors only)
