Week 1 Flashcards
What is reasonable assurance?
A high level of assurance but not a guarantee that an audit conducted in accordance with International Standards will always detect issues called misstatements.
What does independence mean for an auditor?
The auditor must be free from bias, have no conflicts of interest, and not benefit financially or otherwise from the audit.
What is integrity in the context of professional accountants?
A professional accountant must be straightforward and honest in all professional business relationships.
What is professional scepticism?
An attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatement due to fraud or error, and a critical assessment of audit evidence.
What is self-interest in auditing?
Where the auditor has a financial or other interest that will inappropriately influence their judgement or behavior.
What is self review in auditing?
Self review occurs when non-audit work is provided to an audit client, making the auditor unlikely to admit or identify errors in their own work.
What does familiarity mean in the context of auditing?
Familiarity refers to the auditor becoming too sympathetic or trusting of a client, leading to a loss of professional skepticism or crossing professional boundaries.
What is advocacy in auditing?
Advocacy involves promoting the position of a client or representing them, which may lead to the audit firm being perceived as taking sides with the client.
What does intimidation refer to in auditing?
Intimidation involves actual or perceived pressures from the client or attempts to exercise undue influence over the assurance provider.
What are safeguards in auditing?
Safeguards are actions or measures that eliminate a threat or reduce it to an acceptable level.
Why should auditors act ethically?
Ethical conduct helps maintain the credibility of auditors and the auditing profession as a whole.
What is fundamental in any professional relationship, especially in auditing?
Trust is fundamental in any professional relationship, and especially so in auditing.
How does ethical behavior benefit clients and the public?
Ethical behavior ensures that clients, regulators, investors, and the public can rely on auditors to act in the public interest.
What does the sustainability of the auditing profession depend on?
The continued existence and success of the auditing profession depend heavily on public confidence.
What happens if auditors are seen as unethical?
If auditors are seen as unethical, the profession may lose its value and relevance in society.
What are auditors bound by?
Auditors are bound by a code of ethics set by professional bodies such as ACCA, ICAEW, or CPA organizations.
Is ethical behavior a requirement for auditors?
Ethical behavior is not only expected but is a formal requirement to maintain membership and licensure.
Why should auditors act ethically
- credibility of the profession
- trust in auditors and auditing
- Sustainability of the profession
- Professional requirements
- Legal and regulatory compliance
- Personal and professional integrity
- Avoidance of conflicts of interest and bias
- Reputation and career development
What are the goals of employing organisations?
Maximise profit, increase shareholder value, protect corporate reputation, reduce tax liabilities, minimise risk and securing.
What are the needs of wider society?
Transparency in financial reporting, accountability for ethical and legal conduct, fair taxation, prevention of fraud and corruption, protection of investors, employees & the environment.
Do these goals align with the needs of wider society?
Sometimes, ethical practices align with long term sustainability and brand trust
Often not short term profits lead to unethical practices
Examples include tax avoidance and misleading reporting that harms public interest.
What does auditor independence refer to?
The ability of the auditor to carry out their duties objectively, free from bias or undue influence, whether actual or perceived.
What is independence of mind?
The state of mind that permits the expression of a conclusion without being affected by influences that compromise professional judgement, allowing an individual to act with integrity, and exercise objectivity and professional skepticism.
What is independence in appearance?
The avoidance of facts and circumstances that are so significant that a reasonable and informed third party would be likely to conclude that the auditor’s integrity, objectivity, or professionalism is compromised.
