Ethics and Independence Flashcards
What’s the Importance of Ethics in Accounting
It is paramount for accountants to operate within an ethical code to maintain public trust and credibility in the financial information they provide.
This ethical conduct underpins the reliability of audits and financial reporting.
Accountants and auditors are not merely expected to follow rules but must internalise and apply these ethical principles in their professional judgment. This requires self-regulation rather than a purely rules-based approach.
A principles-based approach offers flexibility to adapt to changing situations, placing the onus on the auditor to demonstrate they have considered all relevant factors.
What is considered a fundamental aspect of the source of ethical beliefs for auditors
An individual’s ‘moral courage’ and ethical standpoint is considered fundamental. This aligns with the 1933 Senate Banking Committee hearings.
What forms do ethical beliefs in auditing typically take
Ethical beliefs are formalised into an ethical framework, such as the FRC ethical code and codes from bodies like ICAEW/ICAS/ICAI/ACCA, based on fundamental principles. They also manifest in the distinction between independence ‘in fact’ and ‘in appearance’.
What are the core fundamental principles for professional auditors
The fundamental principles include: Integrity – straightforwardness & honesty, Objectivity – lack of bias or undue influence, Competence and due care, Confidentiality, and Professional behaviour. Accountability to the wider public interest is also a key feature.
How are ethical beliefs in auditing typically categorised in terms of approach
Ethical beliefs can be categorised as either rules-based or principles-based. The auditing profession, particularly with the FRC Ethical Standard, adopts a principles-based approach.
A rules-based approach provides specific regulations and prohibitions. A principles-based approach relies on broader fundamental principles and requires auditors to exercise professional judgment.
