Ethics Ch 4 + 5 Flashcards
Professional competence
The necessary skills and expertise to carry out existing and new work to the required professional standard
Professional journals
Magazines published by the professional accounting bodies in the uk, which include uptodate info on current accounting practice.
Including, current accounting practice, taxation, auditing.
Including links to websites, accounting and business (ACCA), economic (ICAEW), financial management (CIMA), public finance (CIPFA), accounting technician (AAT)
Continuing professional development (CPD)
The way in which accountants maintain their knowledge and skills to ensure that they remain professionally competent
Professional negligence
Occurs when a client, to whom an accountant owes a duty of care, suffers a financial loss that can be proved to be the fault of the accountants
Professional indemnity insurance
Insurance that an accountant takes out to cover an damage they may have to pay a client to professional negligence
Attaining professional competence
People studying to become a member of the AAT will probably be working in an accounting related job. By the time all the training, examinations, and assessments have been successfully completed to allow the person to be a member of the accountanting profession, this should mean they have gained necessary professional competence
Maintaining professional competence
There is a requirement to maintain a level of professional competence. Accountants must keep uptodate with all new developments. Accounting standards are constantly changing. As well as amendments to auditing standards and other legalisation such as taxation laws
International financial reporting standards (IFRS) are issued by the international accounting standards board (IASB) and international standards on auditing (IAS) are issued by the international aiding and assurance standards board (IAASB)
Changed in financial reporting and auditing standards
Professional bodied in the UK base their Ethical codes on the IFAC codes of ethics. This will be updated from time to time by the IFAC
Changes in ethical codes
Changes in tax and company legislation
Companies legislation is through the company’s act 2006
Changes in relevant law (bribery, fraud, money laundering)
Changes to the criminal legislation are contained within the statute law
The three main ways an accountant can keep update with changes
Reading professional journals, enrolling on updating courses, complying with continuing professional development (CPD) requirements for professional accountants
Professional accounting bodies recommends that its members should follow a programme of relevant CPD each…..
Year.
ICAEW ?
Institute of charted accountants in England and wales
AAT
Association of accountanting technicians
ICAEW requires its members to maintain their skills throughout their career. They must confirm they are doing this by _____ every year
Making a CPD declaration every year
It believes its members should complete as much CPD activity as they feel is required
Reflect (ICAEW)
Consider your development needs and how you can meet them and create a plan on action
Act (ICAEW)
Carry out your chosen CPD activity
Impact (ICAEW)
Evaluate the effectiveness of what you have done. Are you satisfied that your actions have enabled you to meet your objectives or do you need more work
Declare (ICAEW)
Each year you must declare your compliance by making a CPD declarion between 1st Nov and 31 Jan
The AAT CPD policy requires its members to undertake sufficient CPD to ensure competence. Part of this is to go through the CPD cycle at last once in a 12 month period or twice for members in practice
.
The AAT CPD cycle contains
Asses, plan, action, evaluate
CPD planner template
On the AAT website used to plan out the CPD that they are going to take
Possible CPD activity’s
Trading courses, obtaining on the job training, self study, research
Useful to write down anything new learns, this makes it easier to fill in the CPD reccord that will be sent to AAT you Can also include informal learning (no limit)
AAT members must keep CPD records which can be requested by AAT at anytime
Registered Members in practice will be asked to submit their CPD records when they renew their registration on the members in practice scheme
.
License members in practice and members doing voluntary work will be asked to submit their CPD records if there are selected at one of the?
An AAT member who is subject to a disciplinary investigation will also be asked to submit their CPD records to AAT
AATS CPD monitoring sessions which take place e Rey February and September.
A professional accountant who works outside the limits of their professional experience will adhere which principle
Fundamental ethical principle of professional competence and due care
If an accountant takes on-a role knowing they’re incapable this would be breaching integrity and professional behaviour.
What threats the ability of an accountant to carry out an appropriate level of competence and due care.
If they have insufficient time or properly performing or completing relevant duties,
if an accountant has inadequate information,
if the accountant has insufficient training,experience
Inadequate resources
Professional liability
Having legal responsibility for something with the possibility of having to pay damages
Liability can arise from a number of issues, including.
Criminal acts, breach of contract in the supply of services, breach of trusts, professional negligence, and fraud
.
A client suffers a financial low that can be proved to be the accountants fault.
Professional negligence.
If the accountant entered into a contract with the client, this could be a breach of contract and uncertain cases they may even be accusations of fraud.
Minimising the risk of professional negligence
- An accountant she ensure before taking in an assignment the exact duties to be included (and excluded) in the assignment are written down and agreed by both the accountant and client.
- Usually done in the letter of engagement
- If further duties are added, these also need to be written down
- when advise if given without information being provided, the accountant must make sure the client is aware of any limitations to this advise and write it down.
- if audited accounts or financial statements are prepared, they should be marked for private use of the client.
- if an assignment is complex, an accountant should take specialist advise and suggest the client does too
Critical areas accountants must contain their professional competence are:
- changes in f* R* and A***** standards
- changes in E** c**
- changes in t** and c***** legislation
- changes in relevant C** l including bribery, f* and money L****
- changes in regulation of accounting, reporting T** C** , A and the accounting and finance profession
- changes in financial reporting and auditing standards
- changes in ethical codes
- changes in tax and companys legislation
- changes in relevant criminal law including bribery, fraud and money laundering
- changes in regulation of accounting, reporting Tax Compliance , Auit and the accounting and finance profession
Financial reporting meaning
Financial statements are formal records of the financial activity’s and position of a business. Relevant information is presents in a structured manner.
Change in the lay out etc.
Change in Auditing standards
A set of systematic guidelines used by auditors when conducting audits on companies finances assuring accuracy
Company’s legislation
Law of Company’s
Changes in criminal Law
Bribery, fraud, money laundering
Change in Tax compliance
Making tax payments and producing and submitting information to the tax authorities on time and in the required formats
The duty of confidentiality on the part of a professional accountant is only applicable for the duration of the assignment? True/false
False, the accountants duty of confidentiality to a client extends to the period after the relationship has ended
An accountant has a professional duty to disclose information to protect their _____ interests in ______
Professional interests in legal proceedings
What is the name of the process by which the person in an organisation who controls date informs the information commissioners office (ICO) about the way in which the organisation handles data
Notification
Duty of confidentiality
The accountants obligation to respect confidential information about the client or employers affairs
On going duty of confidentiality
Fact that the accountants duty of confidentiality continues even after the end of the relationship between the accountant and the employer or client
Authorised disclosure of confidential information
Disclosure of confidentiality information by an accountant following authorisation by the client or employer
Disclosure required by law
The legal requirement for an accountant to disclose financial information about a client or employer
Money laundering
To Kobe illegally acquired cash through financial systems so that it appears to be legally acquired
NCA
National crime agency
Data protection act
Legislation to ensure that data held about individuals is handled properly
ICO
Information commissioners office
Accountants must make sure that any staff they supervise or manage also respect the principle of confidentiality
.
When is it acceptable to disclose confidential information?
When authorised by the client or employer, when disclose is required by law, professional duty to do so
Authorised disclosure
The client or employer could ask the accountant to disclose confidential information.
The main point being the accountant must get specific authority from the client before doing so
Ideally in writing
When giving authorised disclosure
It’s important to to include a disclaimer making it clear that this is for the use of the specific company that requested the information and is given to purely help them make a decision whether to supply goods on credit to your client
Include information is given with out any financial responsibility on the part of yourself or the firm you work for
The legal requirement to disclose confidential information is divided into two main categories:
Where the information is required as evidence
Where the law requires that information must be revealed to the relent authorities in situations where the law has been broken
Evidence in court, the account May receive a witness summons from the court and be required to
Provide documents which will be used in court as evidence
And / Or to appear in court in person to give evidence
Or the account May be subject of a court order. Requiring them to disclose confidential information about yeh client
Break the confidentiality principle even if the client or employer refused permission
Breaking confidential principle due to the law, what if the client refuses that the accountant uses their confidential information
They must wait for a witness summons. When this occurs she is legally required to comply with the summons and provide relevant documentation and maybe appear in court too
Witness summons meaning
legal document ordering someone to appear in a court of law to give information about a particular person or event: apply for/issue/serve a witness summons Witness summonses can be served by post.
Infringement of the law (breaking the law)
.
Wha is the current legislation relating to money laundering
Proceeds if crime act 2002 and the terrorism act 2000 and the money laundering regulations 2007.
This requires that accounts must report immediately any suspicion that they have that money has been gained From illegal activity’s to the nations crime agency NCA
A professional duty to disclose include:
To comply with the quality review of an IFAC (international federation of accounts) member body it or other relevant professional body
To respond to an inquiry by the professional accounting body or by the regulatory body of an ethical, investigatory or disciplinary nature
To protect the professional interests of the accountant in legal proceedings
Comply with technical standards and ethical requirements
Accountants are advised to seek professional or legal advise before disclosing confidential information regarding the professional duty to disclose
.
Data protection act 1998
It states that anyone who processes personal information must comply with these 8 principles which make sure the personal information is handled properly
Fairly and lawfully processed
Processed for limited purposes
Adequate, relent and not excessive
Accurate and up to date
Not kept for longer than necessary
Processed in line with the individual rights
Secure
Not transferred to other countries without adequate protection
Data protection act 1998 includes the right to find out way personal information is held on computer and paper records about them
If an individual or organisation feel they are being denied access to personal information or they don’t believe their data is being handled fairly - they should contact ICO (information commissioners office)
There is a statutory requirement for every organisation that processes information to register with the ICO. They must register annually and pay and annual fee to the ICO. Notification is he process by which the person controlling the data gives the ICO details about the way in which the company processes date.
Failure to notify the ICO could result in a fine if convicted
