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Audit & Assurance > W3 - Professional Ethics for external auditors and acceptance > Flashcards

W3 - Professional Ethics for external auditors and acceptance Flashcards

1
Q

What is the conceptual framework ?

A

A list of Do’s and Dont’s to cover situations a auditor may face however, they don’t cover every topic allowing auditors to exercise judgement.

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2
Q

What are some advantages to a principles based approach ?

A
  • Flexibility
  • Adaptability
  • Enhanced professional judgement
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3
Q

What are some disadvantages of a principles based approach ?

A
  • Poor interpretation
  • Different interpretations
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4
Q

What are the ACCA and IFAC fundamental principles ?

A
  • Professional competence and due care
  • Objectivity
  • Professional behaviour
  • Integrity
  • Confidentiality
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5
Q

What are some exceptions for disclosure ?

A
  • Client permission
  • Law requirement
  • Protect public interest
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6
Q

Where may a conflict of interest occur in audit ?

A

When two client may be competitors in an industry and information may be sensitive to their operations

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7
Q

Why is external auditor independence important ?

A
  • Required by companies act and is a ethical violation to not have a independent external auditor
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8
Q

How does the companies act deal with independence ?

A
  • Shareholders appoint auditors
  • Company office cannot become an auditor
  • Auditors can access all books
  • Removal rights
  • Rights/duties with resignation
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9
Q

What conflict may an auditor face ?

A
  • Pressure from management
  • Audit fees
  • Non audit fees
  • Regulation
  • Firm reputation
  • Loss of personal reputation
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10
Q

What are some potential threats an auditor may face if they’re not objective ?

A
  • Self interest
  • Self review
  • Advocacy
  • Familiarity
  • Intimidation
  • Management
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11
Q

Give some examples of the threat an auditor may face as a result of self interest ?

A
  • Shares for liancy
  • Gifts for hospitality
  • High percentage fee/income
  • Contingent fee
  • Relationships
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12
Q

What is a self review threat ?

A

This occurs when a company may provide multiple services for a company

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13
Q

Give some examples of self review threat ?

A
  • Bookkeeping
  • Internal audit services
  • Preparing accounting records and financial statements
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14
Q

Can you give some examples of familiarity threat ?

A
  • Family relationship
  • Long relationship with client
  • Auditor gained employment
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15
Q

Can you give some examples of intimidation threat an auditor may face ?

A
  • Financial lean (non payment of fee)
  • Legal lean (threaten to sue)
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16
Q

Can you give some examples of an advocacy lean ?

A
  • Promoting the shares of a company
  • Acting on behalf of an audit client in tax litigation
17
Q

What is a management threat ?

A
  • FS preparation
  • Tax planning
  • Corporate finance
18
Q

What are some independence and safe guards

A
  • Ethics standards firm and profession wide
  • Disciplinary procedures
  • Continuous professional development and training
  • Monitor fee income
  • Rotation of audit partners
  • Withdraw from engagement/decline to provide service
  • Independent partner review / EQCR required for public interest audit clients
19
Q

What must an audit firm do before taking on a new client ?

A
  • Risk
  • Resources
    -Ethical issues
  • Outgoing auditor communication (etiquette letter)
  • Money laundering requirements
20
Q

What are some of the requirements of money laundering ?

A
  • Confirmation of directors and shareholders
  • Confirm incorporation documents
  • Understanding business
  • Any suspicious activities should be reported to the MLRO within the firm first and then the National Crime Agency without tipping off the client.
21
Q

What should an auditor do after acceptance ?

A
  • Ensure outgoing auditor is gone
  • copy of resolution reappointment
  • Letter of engagement for the agreement to terms and scope
22
Q

What should be included in the letter of engagement ?

A
  • Responsibilities of parties
  • Scope of audit and standards
  • Legal requirements
  • Level of assurance
  • Audit fees
  • Agreement from directors
23
Q

Why are letters of engagement introduced ?

A
  • Clarify terms of engagement and responsibilities of parties

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