Ethics

Question 1

Safeguards to identify or deter unethical behaviour

Answer 1

Created by profession/regulation or legislation:

• Education/training/ entry experience
• CPD requirements
• Corporate governance regulations
• Profesional standards/monitoring and disciplinary procedures
• External reviews

In the work environment :

• effective complaints system
• duty to report breaches

Question 2

Ethical conflict resolution

Answer 2

Consider : relevant facts, parties, ethical issues involved, relevant fundamental principles, established internal procedures , alternative courses of action

Consult with others :
Appropriate persons within the firm
Board of directors
Professional body or legal advisors

If no possible further action resign from engagement team or firm all together

Question 3

Disclosure of information

Answer 3

When to disclose :

• When permitted by law and authorised by client/ employer
• required by law
• professional duty to disclose but no prohibited by law

Factors to consider:

• Harm to interested parties
• all relevant info known and substantiated
• type of communication expected and to whom addressed
• legal and regulatory obligations

Question 4

Conflict of interest examples

Answer 4

Threat to objectivity

Examples :

• Client specific interests conflict with those of firm
• financial involvement with the client (loan)
• acting for husband and wife in divorce
• acting for a company and it’s directors in their personal capacity
• acting for both a partnership and it’s partners in their personal capacity
• acting for two competing businesses
• staff in secondment with hmrc

Question 5

Conflict of interest what to do

Answer 5

If threats > insignificant consider and apply safeguards

-Notify all relevant parties of the conflict
-obtain consent to act
-consider the following ;
~Use separate teams
~Procedures to prevent access to info
~Clear guidelines for members of team on ~security and confidentiality
~use of actual and perceived confidentiality agreements signed by employees and partners of the firm
~regular review of application of safeguards by senior individual not involved with relevant client engagements

If threat cannot be eliminated or reduced to ACCEPTABLE LEVEL it is not acceptable to accept the engagement

Question 6

New client procedures

Before accepting new clients

Answer 6

Determine whether acceptance would create threats to fundamental principles

Ensure engagement team have competencies necessary to properly carry out the engagement

Contractual relationship governed by letter of engagement for every contractual relationship (eg both husband and wife in divorce ) containing :

• Scope of clients and accountants responsibilities
• authority to disclose HMRC errors