Ethics and obtaining an engagement assignment Flashcards
When can confidential info be disclosed?
Permitted by law and authorised by client
Disclosure required by law
Professional right/duty (defend themselves in court)
What are examples of money laundaring?
Keeping overpayments (tax/customers)
Non-compliance with money regulations to save money.
Can you audit companies with conflicting interests like competitors?
Must let me know and receive written consent with safeguards
- Separate Teams
- Information barriers
- confidentiality agreement
Client due diligence
Correct identification, photo identification (name and address). These must be kept for a min of 5 years.
What are the fundamental principles of the international ethics standard board?
Integrity = honest + professional.
Objectivity (independence) = not allow bias or influence to override professional.
professional competence + due care = maintain professional knowledge and skill at level required to provide a competent up to date service.
What is independence?
When an auditor is able to make a conclusion without integrity or objectivity being compromised.
Self-interest threat
Financial or other interest will inappropriately influence professional judgement/behaviour.
- overdue fees with client
- gifts + hospitality
- contingent fees
Self-review threat
Auditors face risk of reviewing their own work. Can happen if auditor provides other financial services.
- preparing financial statements
- client staff member joins the team
- internal audit
- system implementation
Advocacy threat
When auditor is in a position to promote clients where accounts compromised.
- represent client in tax tribunal
- legal services
- contingent fees
- corporate finance (selling client)
Familiarity threat
When virtue of a close relationship becomes too sympathetic (rotate auditor every 5 years)
- family
- recruitment (audit staff join the client)
- long association
Intimidation threat
Threat that they are deterred from acting objectively because of actual/perceived pressures.
- actual/threatened litigation.
- physical violence
- close relationship
Management threat
Auditor becomes closely aligned with views + interests of management.
- representative on clients board
- take on management responsibilities/ tasks
management threat and self-review often occur together.
Money Laundering
Process by which proceeds are converted into assets which can appear to have a legitimate origin, so they can be retained/recycled into further criminal exercises.
What is an audit engagement letter?
Letter that defines responsibilities, minimised potential misunderstanding.
provides written confirmation of:
- acceptance of appointment
- scope of engagement
- form of report
- includes level of access and reporting framework.
What may an engagement letter include?
- Inherent limitations
- planning arrangements
- expectations of management regarding representation letter
