Ethics Flashcards
What are the five fundamental principles of the ICAEW ‘Code of Ethics’?
- Integrity
- Objectivity
- Professional competence and due care
- Professional behaviour
- Confidentiality
What is meant by integrity?
Members should act in a straightforward and honest manner in performing their work
For example, an ICAEW member should not be involved in providing HMRC with inaccurate or misleading information about a client’s tax affairs.
What is meant by objectivity?
Members should not allow prejudice or bias, or the influence of others, to override objectivity
What is meant by ‘professional competence and due care’?
Members must exercise sound judgement in applying professional knowledge and skill:
- Members should not undertake work that they are not competent to carry out
- Members have an ongoing duty to maintain professional knowledge and skills
- Members should carry out their work with due care having regard to the nature and scope of the assignment
What is meant by ‘professional behaviour’?
Members should refrain from any conduct that might bring discredit to the profession
An accountant should not put his or herself in a position where a reasonably informed third party, having knowledge of all relevant information, might derive a negative conclusion that would affect the good reputation of the profession.
What is meant by confidentiality?
Members should respect the confidentiality of information acquired as a result of professional and business relationships
Confidential information acquired through professional or business relationships should not be used for the personal advantage of members or third parties
When can members disclose information to third parties?
Members should not disclose any such information to third parties unless:
- they have proper and specific authority; or
- there is a legal or professional right or duty to disclose e.g. money laundering
What constitutes a self-interest threat?
A self-interest threat may occur as a result of a member’s financial or other interests, or those of an immediate or close family member, influencing behaviours and decisions of the member
What constitutes a self-review threat?
A self-review threat may occur when a previous judgment needs to be re-evaluated, or reviewed, by the same member responsible for that judgment
What constitutes an advocacy threat?
An advocacy threat may occur when a member promotes a position or opinion to the point that objectivity may be compromised
What constitutes a familiarity threat?
A familiarity threat may occur when, because of a close relationship, a member becomes too sympathetic to the interests of a client
What constitutes an intimidation threat?
An intimidation threat may occur when a member is deterred from acting objectively by actual or perceived pressures from others
What are safeguards?
Safeguards are measures that may reduce threats to an acceptable level, or eliminate them entirely
What are some possible safeguards against threats to compliance with the fundamental principles?
- Education/training/experience required for entry into the profession
- CPD requirements
- Corporate governance regulations
- Professional standards
- Monitoring/disciplinary procedures
- External review
- Complaints systems
- Explicitly stated duty to report breaches of ethics
What is the first step in a conflict resolution process?
- Consider the following factors:
- the relevant facts and parties
- the ethical issues involved
- the fundamental principles relating to the matter in question
- any established internal procedures
- possible alternative courses of action
What is the second step in a conflict resolution process?
- If the conflict remains unresolved, the member should then seek advice within his or her own firm and document the advice given
What is the third step in a conflict resolution process?
If the member is a sole practitioner or cannot resolve the matter internally, he or she should seek legal advice or advice from the ICAEW
What is the fourth step in a conflict resolution process?
If the ethical conflict cannot be resolved, the member should consider withdrawing from the engagement/conflict situation
With whom can conflicts of interest arise?
- firm and client
- two clients (managed by same firm)
What should members do if a conflict of interest is identified?
- Notify relevant parties of any actual/potential conflict(s) of interest
- Obtain consent from relevant parties to act
- Consent can then either be refused or granted
- If the conflict cannot be resolved, consider not accepting/resigning from one engagement
What do you do if consent is refused from one party within a conflict of interest?
If consent is refused, cease acting for one party involved in the conflict
What do you do if consent is granted from one party within a conflict of interest?
- Use seperate engagement terms
- Impose procedures to prevent access to information
- Issue guidelines to team members, on both engagement teams, in relation to security and confidentiality
- Regular review of safeguards by senior members of staff not involved with the conflicting engagements
What is tax avoidance?
Tax avoidance is using any legal method to reduce an entity’s tax burden, even if the method is not following the intent of the law (e.g. artificially using foreign jurisdictions with low tax rates)
What are promoters of tax avoidance schemes required to do?
Promoters of tax avoidance schemes are now required to disclose details to HMRC, to allow HMRC to close loopholes quickly
