Module 11 Auditor independence and ethics

Question 1

What is a covered person

Answer 1

A person in a position to influence the conduct or outcome of an engagement

Question 2

What is ICAS’s code of ethics

Answer 2

COPIP

Integrity

Objectivity

Professional competence and due care

Confidentiality

Professional Behaviour

Question 3

What is independence?

Answer 3

Freedom from conditions and relationships which make it probable that a reasonable and informed third party would conclude that integrity or objectivity either is or could be impaired

Independence has two facets, facts of independence and appearance of independence - auditor must not only be independent but must also been seen to be independent

This can be achieved by having evidence of properly monitored standards for auditor conduct and these standards are properly enforced

Question 4

What are the six threats which may affect independence?

Answer 4

MASSIF

Self interest - when the auditor has financial or other interests which may cause to be or seen to be reluctant to take actions that would adverse their interests

Self Review - When the results of a non audit service by the firm are reflected in the amounts included or disclosed in the financial statement

Management - Making judgements and taking decisions that are the responsibility of management

Advocacy - The auditor firm adopts a position closely aligned to that of management

Familiarity - When the auditor is predisposed to accept or is insufficiently questioning the clients point of view

Intimidation - when auditor conduct is influence by fear or threats

Question 5

What is the SOX conflict of interest rule?

Answer 5

SOX prohibits a registered public accounting firm from providing any audit services if the CEO, CFO or CAO were employed by the accounting firm and participated in any capacity int he audit of the company during the year preceding the date of the initiation of the audit