ethics Flashcards
What does ‘Professional Competence & Due Care’ entail?
Attaining and maintaining professional knowledge and skill required to provide competent service to clients.
Includes acting diligently and in accordance with technical and professional standards.
What is the definition of ‘Integrity’ in a professional context?
Being honest and straightforward in all professional and business relationships.
Professionals should not associate with misleading information.
What does ‘Confidentiality’ require from a professional?
Respecting the confidentiality of information acquired through professional and business relationships.
Define ‘Objectivity’ in the context of professional ethics.
Not compromising professional or business judgment due to bias, conflict of interest, or undue influence.
What is meant by ‘Professional Behaviour’?
Complying with relevant laws and regulations and not engaging in activities that impair integrity, objectivity, or reputation.
Under what scenario can auditors breach confidentiality due to obligatory responsibility?
When there is a legal requirement to disclose information, especially in cases of illegal activities.
What are the two types of responsibilities under which auditors can breach confidentiality?
- Obligatory responsibility (legal disclosure required)
- Voluntary responsibility (right to disclose for quality review or public interest)
What is a ‘Self Interest threat’?
A situation where personal interests could compromise professional judgment.
Examples include owning shares in a client’s business or receiving loans from a client.
List three examples of ‘Self Review threat’.
- A director of the client joins the audit firm
- Providing accounting services to the same client
- Preparing financial statements for audit clients (not allowed for listed clients)
What constitutes a ‘Familiarity threat’?
Situations where close relationships could impair objectivity.
Examples include acceptance of gifts or long-term involvement with a client.
Define ‘Intimidation threat’.
A situation where an auditor feels threatened by a client, potentially compromising their judgment.
What is an ‘Advocacy threat’?
When an auditor acts as an advocate for a client, potentially compromising objectivity.
What are some examples of safeguards against ethical threats?
- Disposal of shares
- Removal from the audit team
- Independent review
- Discussing issues with the audit committee
- Refusing to perform the engagement
What is the maximum percentage of total fees from a listed client over two consecutive years?
15% of the firm’s total fees.
What is the rotation period for the Engagement Partner for listed audit clients?
Rotate after cumulative 7 years with a cooling-off period of 5 years.
How long is the cooling-off period for audit team members or Engagement Quality Reviewers?
3 years after rotation.
What happens if a local regulation states a cooling-off period shorter than 5 years?
Consider the higher of the mentioned period or 3 years.
In what case can an audit partner serve for an additional year beyond the 7-year rotation?
If the audit partner cannot be rotated due to reasons like death.
Fill in the blank: The total fees from a private company should not exceed _______ of the firm’s total fees for five consecutive years.
30%
