Ethics Flashcards
1
Q
Fundamental ethical principals (5)
A
- integrity
- objectivity
- professional competence and due care
- confidentiality
- professional behaviour
NB independence falls under objectivity
2
Q
General threats to independence (5+1)
A
• self-interest • self-review • advocacy • familiarity • intimidation As per ICAEW code of ethics
+ management
Included by FRC
3
Q
Self-review threat (4)
A
- preparing financial statements and accounting records (auditing own work)
- corporate finance
- service with assurance client (being asked to join)
- services (internal audit, tax, valuation etc.)
4
Q
Self-interest threat (11)
A
- high % of fees
- contingent fees
- overdue fees
- loans and guarantees
- gifts and hospitality
- family and business relationships
- partner of client board
- employment with assurance client
- close business relationships
- financial interests
- lowballing
5
Q
Advocacy threat (3)
A
- legal services
- contingent fees
- corporate finance
6
Q
Familiarity threat (4)
A
- family and personal relationships between client/firm
- employment with assurance client
- recruitments
- long association with assurance client
7
Q
Intimidation threat (4)
A
- close business relationships
- family and personal relationships
- assurance staff members move to employment with client
- litigation
8
Q
Management threat
A
Audit only
Firm making judgements and taking decisions
Safeguards:
• engagement letter with responsibilities
• ensure client has ‘informed management’
• 2nd partner review
9
Q
Ineligible for being company auditor according to Companies Act 2006 (4)
A
- an officer or employee of the company
- a partner or employee of such a person
- any partner in a partnership in which such a person is a partner
- ineligible by the above for appointment as auditor of any directly connected companies
NB RSBs usually far stricter in their criteria for elibility as an auditor
