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AAT > Level 3 Ethics > Flashcards

Level 3 Ethics Flashcards

1
Q

Why behave ethically?

A

~ law and regulation
~ reputation and standing
~ protection of the public interest

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2
Q

What are the 5 fundamental ethical principles

A 
Integrity
Objectivity
Professional competence and due care
Confidentiality
Professional behaviour
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3
Q

What is integrity?

A

Straightforward, honest, implies fair dealing and truthfulness

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4
Q

What Is objectivity?

A

Uncompromised by bias, conflict of interest or the undue influence of others

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5
Q

What is professional competence and due care?

A

Maintain professional knowledge and skill and act diligently

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6
Q

What is confidentiality?

A

Refrain from disclosure of confidential information, and from using such information for personal (or third party) advantage.

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7
Q

What is professional behaviour?

A

Comply with relevant laws and regulations, and avoid any action that may bring the profession into disrepute.

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8
Q

What is the basic problem solving procedure set by the accountant’s code of professional ethics?

A

Identify the threat to a fundamental principle

  • > evaluate the threat
  • > apply safeguards
  • > if safeguards cannot be applied, discontinue the action or service.
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9
Q

What are the threats to our fundamental principles?

A 
Self-interest
Self-review 
Advocacy 
Familiarity
Intimidation
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10
Q

What are the two types of safeguards?

A

1) safeguards created by the profession, legislation or regulation
2) safeguards in the work environment (eg quality control)

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11
Q

What are the advantages to the ‘principles’ approach

A 
~ Rigorous (comply with the spirit)
~ 'Bigger picture'
~ Flexible for changing circumstances
~ Promotes development of skills and judgement
~ Creates a culture of ethical awareness
~ Encourages personal responsibility
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12
Q

What are the advantages to the ‘rules’ approach?

A

~ Clear cut
~ Correct course of action will be more obvious
~ Easier to enforce

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13
Q

What are the disadvantages to the ‘principles’ approach?

A

~ Not easy to find the right answer
~ May be more than one course of action
~ Conflicting interests need to be balanced

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14
Q

What are the disadvantages to the ‘rules’ approach?

A

~ Loopholes can be found
~ ‘Tick box’ mentality promoted
~ Have to legislate for every eventuality
~ New requirements must be developed
~ Too detailed - miss the ‘bigger picture’

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15
Q

Who are the UKs accounting regulators?

A

FRC - the financial reporting council

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16
Q

Who are the international accounting regulators?

A

IESBA - international ethics standards board for accountants

IFAC - international federation of accountants

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17
Q

What are some safeguards created by the profession and/or legislation and regulation?

A
  • Relevant education and training as a standard entry requirement to the professional body
  • compulsory CPD to update professional knowledge
  • corporate governance (adopt internal controls and national/international financial reporting)
  • professional standards (monitoring and application of disciplinary procedures to report unethical behaviour)
  • external review of financial reports by auditors.
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18
Q

What are some safeguards created in the work environment?

A
  • quality controls, internal audits
  • mechanisms to protect “whistle blowers”
  • consult independent third parties
  • allow job rotation
  • share and discuss ethical dilemmas with experts
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19
Q

What are the rules for handling clients money?

A

Clients funds must be separate and identifiable from the accountants monies; used exclusively for the intended purpose; accountants accountability (any mishandling could result in theft and/or abuse of position)

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20
Q

What is operational risk?

A

Risk of loss or damage to routine business activities resulting from inadequate or failed internal processes, people and systems or from external events.

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21
Q

What is event risk?

A

Operational risk of of loss due to single events that are unlikely but may have serious consequences

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22
Q

Operational risk classifications are:

A 
Reputational
Litigation
Process
People
Systems
Legal
Event
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23
Q

What 3 services can only be provided by licensed/authorised accountants?

A

External audit
Investment
Insolvency

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24
Q

Money laundering legislations:

A

Money laundering regulations 2007
Terrorism act 2000 (ta)
Proceeds of crime act 2002 (POCA)

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25
Money laundering: penalties
Up to 14 years imprisonmanet and/or unlimited fines
26
Money laundering: who do you disclose to ?
MLRO or SOCA
27
Money laundering: if you don't disclose....
Subject to 5 years imprisonment and/or unlimited fines
28
Bribery act 2010
Gifts/hospitality/inducements leading to corruption; up to 10 years imprisonment and unlimited fines
29
Name some objectives of the accountancy profession
~ the mastering of particular skills and techniques ~ development of an ethical approach to work ~ acknowledgment of duties to society ~ objective outlook ~ rendering services to the highest standards ~ achieving acceptance by the public
30
What professional bodies sponsor the AAT
- ICAEW institute of chartered accountants in England and Wales - ICAS institute of chartered accountants of Scotland - CIPFA chartered institute of public finance and accountancy - CIMA the chartered institute of management accountants
31
Which professional bodies are members of ccab?
- CAI chartered accountants of Ireland - ACCA association of chartered certified accountants - ICAEW institute of chartered accountants in England and Wales - ICAS institute of chartered accountants of Scotland - CIPFA chartered institute of public finance and accountancy
32
What are the 3 committees of the FRC?
- codes & standards committee - executive committee - conduct committee
33
What are the 2 categories of UK law?
Criminal law | Civil law
34
Criminal law...
Affects the whole community. | Punishable by fines or imprisonment
35
Civil law...
Relates to conflicts within the community. | The concept of punishment does not apply
36
What is the CCAB?
The consultative committee of accountancy bodies | The CCAB co-ordinates and unites the accountancy profession in the UK and Ireland
37
What is the HMRC?
A government department whose aim is to ensure that the correct tax is paid at the right time
38
What is the NCA?
The national crime agency (NCA) is a UK body whose aim is to tackle serious organised crime such as Class A drugs, human trafficking, fraud and money laundering
39
What are the advantages of effective ethical programmes?
- improve communication of expected standard of behaviour - promote consistency of conduct - help to reduce risk and damage to corporate reputation
40
What is sustainability
Meet the needs of the present without compromising the ability of future generations to meet their own needs (UN Brundtland report)
41
What is Corporate Social Responsibility (CSR)?
The obligations that a business feels it has to its local community, persons and organisations connected to it and to the society as a whole.
42
What is the 'triple bottom line'? (sustainability)
- Financial (supporting organisational profitability, clients, local businesses, paying suppliers) - Social (supporting labour, the community and the region the business operates) - Environmental (use less energy, create less pollution, support policies to manage resources)
43
What are the responsibilities of finance professionals?
- creating and promoting ethical culture - championing the aims of sustainability - evaluating and quantifying reputation all and other ethical risks - taking social, environmental and ethical factors into account when making decisions - promoting sustainable practices - raising awareness of social responsibility
44
What are the types of operational risk? (Won't need to know all of these)
- Internal fraud - External fraud - Employment practices and workplace safety - Clients, products and business practice - Damage to physical assets - Business disruption and system failures - Processes and delivery outputs
45
Name some sources of event risk
Physical Social Political Economic
46
What is Continuing professional development (CPD)
CPD develops and maintains the capabilities that enable a member to perform competently within the professional environment
47
Key areas to keep up to date (CPD)
``` Reporting and auditing standards Ethical codes Tax and company legislation Criminal law affecting accountants Other regulations affecting accountancy ```
48
During your dealings with clients, suppliers, colleagues and others you should act with
Integrity, honesty, fairness and sensitivity
49
Self interest threats to members in practice could be...
- Having a financial interest in client - Depending upon a client's fees for a significant portion of income - Having a close personal relationship with client - Having concerns about losing a client or protential employment with one - Contingent fees
50
Self interest threats to members in business could be...
- Having financial interest in the employer - Financial incentives based on profits - Opportunity to use corporate assets to own advantage - Threats to job security or promotion prospects - Commercial pressure to help firm complete in order to keep job
51
Self review threats to members in practice could be...
- Discovery of a significant error when re-evaluating own work - reporting on systems after being involved in designing them - preparing the data used in reports you are required to check
52
Self review threats to members in business could be...
Being asked to review data or justify/evaluate decisions that you have been involved in
53
Familiarity threats to members in practice could be...
- Having a close or personal relationship with a senior employee of a client - a former partner of the firm now in a senior position of the client firm - accepting significant gifts or preferential treatment from a client - long association of senior personnel with the client
54
Familiarity threats to members in business could be...
- Having a close or personal relationship with someone who may benefit from your influence - long association with a business contact which may influence your decisions - acceptance of a significant gift or preferential treatment
55
Intimidation threats to members in practice could be...
- threat of dismissal, replacement, or litigation in respect of an engagement - pressure to reduce quality of work to keep fees down
56
Intimidation threats to members in business could be...
- threats of dismissal or replacement over a disagreement | - a dominant individual attempting to influence your decisions
57
Advocacy threats to a member in practice could be...
Acting on behalf of an audit client which is in a dispute with a third party
58
Advocacy threats to members in business could be...
There are unlikely to be a significant advocacy threat to employees of an organisation, since they are expected to promote the employer's position to further its objectives.
59
Before accepting a new appointment you must consider...
- whether you have the expertise and competence - whether you have the resources (staff and time) - whether you are objective - whether there is a threat to confidentiality
60
Conflict of interest
The interests of one client should not have a negative effect on the interests of another client Eg 2 client companies in are direct competition - and adverse disclosures about one would benefit the other.
61
In the event of a conflict of interest you should...
- put safeguards in place to avoid the negative effects - avoid new appointments that might negatively affect existing clients - disclose enough information to both parties, so that they can made a decision
62
Conflicts of interest in large firms...
In large firms it is possible to build "Chinese walls", using separate staff teams for different clients.
63
Second opinions... Safeguards to apply:
- seek clients permission to contact existing accountant - describe any limitations surrounding any opinion in client communications - provide existing accountant wait ha copy of the opinions - discontinue if client does not provide permission to contact existing firm

AAT (1 decks)

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