Codes of professional ethics and regulatory issues

Question 1

Why do auditors need ethics?

Answer 1

They have to consider the public interest and maintain a reputation as people rely on them and their expertise. It gives an independent view and protection

Question 2

What are the sources of ethical guidance?

Answer 2

ICAEW Code
IESBA Code
FRC

Question 3

Is the ICAEW rules or principles based?

Answer 3

Principles

Question 4

What are the advantages of a principles based framework?

Answer 4

Active consideration and demonstration of conclusions - not a checklist
Broad interpretation of ethical situations - compliance
Individual situations covered - allows for variation
Flexible to changing situation - accommodate changing environment
Incorporates prohibitions

Question 5

What are the fundamental principles of ethics?

Answer 5

Integrity - straightforward and honest
Objectivity - no bias
Professional competence and due care - maintain skill
Confidentiality - not disclosing
Professional behaviour - no discreditation

Question 6

What are the safeguards by profession, legislation or regulation?

Answer 6

Training, continuing professional development, audit committee, professional standards, monitoring and disciplinary procedures, external reviews

Question 7

What are the safeguards in the work environment?

Answer 7

Additional accountant to review work done, consulting an independent 3rd party, rotating senior personnel every 5 years for listed, 10 for non-listed, extent of fees, declaration of independence

Question 8

What are the upper and lower fee limits for listed and non-listed companies?

Answer 8

UL: 10%, LL: 5%
UNL: 15%, LNL: 10%