Ethics Flashcards
a) How are safeguards against unethical practice created by the profession?
b) How are safeguards against unethical practice created in the work environment?
a)
- Ethical training
- CPD requirements
- Professional standards & disciplinary procedures
b)
- Effective complaints procedures
- Duty to report breaches
- Training
What are the risk factors that should be considered in any issue that could be unethical?
- Consider the relevant facts
- Consider the relevant parties
- Consider that ethical issues are involved
- Consider which fundamental principles are related
- Consider the established internal procedures
- Consider alternative courses of action
What courses of action are available to an accountant who comes across an unethical situation?
- Discuss the matter with the appropriate people in the clients firm
- Escalate to management in the clients firm
- Seek professional advice from ICAEW
- Seek legal advice
- Consider resigning
What steps should be taken when unethical behaviour of a client is discovered within a confidential relationship
- Consider if there is a legal obligation to disclose
- If disclosure is not to be made, reasons need to be documented
- If disclosure should be made, client should be notified and if they disagree with professional opinion to disclose then accountant should consider resigning
Which fundamental principle do conflicts of interest threaten?
Objectivity
What actions and potential safeguards should be put in place if a conflict of interest is identified in an engagement?
- Notify relevant parties
- Obtain consent to continue to act
Safeguards:
- Separate engagement teams
- Information access controls
- Confidentiality agreements between teams
- Regularly review safeguards
What safeguards should be followed during and proceeding an accountant’s secondment to HMRC?
During : They should not be involved in matters relating to the seconding organisation or its clients
After : They should not be involved with any tax payer they were involved with at HMRC for a significant period
What new client procedures should be followed before & during onboarding?
- Consider whether acceptance would threaten compliance with any fundamental principle
- Ensure firm has sufficient resources and engagement team are sufficiently competent to act
- Engagement letter needs to be signed before every engagement. It should contain:
> Scope of engagement
> Authority to disclose errors to HMRC
Who is required to have professional indemnity insurance?
What is the minimum amount?
Who is covered by PII?
How long should cover remain in place for after ceasing public practice
Every member in public practice
Minimum £1,500,000
OR
2.5 times gross fee income if gross fee income is < £600,000 (minimum cover of £100,000)
PII normally covers all employed members at a firm
Minimum of 2Y cover after ceasing practice but ICAEW recommend 6Y
What steps should be followed if an accountant discovers a HMRC error in the client’s favour, i.e. over repayment or undercollection?
- Authority to advice HMRC of any errors should be included in engagement letter
If it is not, an accountant must seek authority from client before disclosing
- If client does not authorise, they should be informed of potential legal consequences
- Accountant should cease to act
- HMRC should be notified that accountant has ceased to act but it cannot be disclosed why as there is no authority to disclose error
- Ensure written records are kept
- Consider whether ML report should be made
What anti money laundering procedures should all firms establish?
- Appoint MLRO
- Train staff
- Establish internal procedures for reporting
- Know your client procedures & verify identity, maintaining evidence
What are some legitimate defences against failure to report suspicions?
- Lack of training (employees only, not employers)
- Privileged circumstances when acting for client eg. during litigation
- ML took place abroad and was not illegal there
