Lecture 12 - Professional Ethics (1) Flashcards
Audit quality is….
The probability that the auditor will both discover a breach in the client’s accounting system and report a breach in the client’s accounting system
Credibility can only be effectively given to auditors who are….
Independent of the subject matter being audited
Independence of mind is….
The state of mind that permits the expression of a
conclusion without being affected by influences that compromise professional judgment, thereby allowing an individual to act with integrity, and exercise objectivity and professional scepticism.
Independence in appearance is….
The avoidance of facts and circumstances that are
so significant that a reasonable and informed third party would be likely to conclude that a firm’s, or an audit team member’s, integrity, objectivity or professional scepticism has been compromised
Circumstances which the auditor faces in which threats to independence emerge.
- Financial, business, employment and personal relationships
- Long association with engagements
- Fees, remuneration, evaluation policies, gifts and hospitality, litigation
- Non-Audit Services
IFAC Code sets out International Independence Standards for auditors:
- Identifies circumstances posing threats to independence
- Sets out application material on how to apply the conceptual framework to identify, evaluate and eliminate threats
- Discerns ‘stricter’ requirements for audits of public interest entities (e.g. listed companies, banks)
Guardian function is….
- Skill and competence and judgement to issue an audit opinion
- Acting for shareholders and acting in the public interest
Commerce function is….
- Reliance of fees from the client – audit and non-audit fees
- Reliance on repeat business
- Need to sustain a professional working relationship (with shareholders, directors, stakeholders)
ICAEW works to protect…
The public interest by making sure its firms, members, students and affiliates maintain the highest standards of professional competency and conduct.
