Ch 1 Ethics Flashcards
(40 cards)
What are the 5 fundamental principles?
Integrity Objectivity Professional competence and due care Professional behaviour Confidentiality
Define integrity
Members should act in a straightforward and honest manner in performing their work
Define objectivity
Members shouldn’t allow prejudice or bias, or the influence of others, to override objectivity
Define professional competence and due care
Members must exercise sound judgement in applying professional knowledge and skill
- Shouldn’t undertake any work they are not competent to carry out
- Members have an outgoing duty to maintain professional knowledge and skills
- Members should carry out their work with due care having regard to the nature and scope of the assignment
Define professional behaviour
Members should refrain from any conduct that might bring discredit to the profession
Define confidentiality
Members should respect the confidentiality of information acquired as a result of professional and business relationships.
- Shouldn’t disclose any such info to third parties unless
- they have proper and specific authority
- there is a legal/prof duty to disclose
e. g. money laundering
Confidential info acquired as result of prof/bus relationships shouldn’t be used for personal adv of members/third parties
If you prepare Jane and her husbands tax returns, can you discuss Janes affairs with her husband?
Can’t discuss his tax affairs with husband unless you have Janes permission
You have duty of confidentiality to Jane
Define self-interest
Such a threat may occur as a result of a member’s financial or other interests, or those of an immediate or close family members, influencing behaviours and decisions of the member
Define self review
Threat can occurs when a prev judgement needs to be re-evaluated, or reviewed, by the same member responsible for that judgement
Define advocacy
Such a threat may occur when a member promotes a position or opinion to the point that obj may be compromised
Define familiarity
Occurs because of a close relationship, a member becomes too sympathetic to the interests of the client
Define intimidation
May occur when a member is deterred from acting objectively by actual or perceived pressures from other
What do safeguards do
Reduce the threats to an acceptable level, or eliminates them entirely
If you’re a trainee and preparing a SA TR and noticed errors in the previous TR that was prepared by your man. Man begs you not to tell your partner and offers you a large bonus to keep quiet. What are the threats to fundamental ethics principles?
Self-interest threat as man promised a bonus for keeping quiet about his errors
Intimidation threat as man is in position of authority over you
When initiating an ethical conflict resolution process, what factors should be considered?
Relevant facts Ethical issues involved Fundamental principles relating to the matter in q Any established internal procedures Possible alternative courses of action
If a conflict remains unresolved after r the ethical conflict resolution process, what should a member do?
Seek advice within his/her own firm and document the advice given
Seek legal advice or advice from their professional body
Consider withdrawing from the eng/conflict situation
You work for ICAEW CA and manager is approached by a new client, whose TR were prev done by non-qualified TR. Client has contacted HMRC about errors, and wanted to know the safeguards in place to protect him in case of any future problems with work carried out by your firm. What safeguards are available to reassure clients in relation to the work of ICAEW CA?
Safeguards:
- CPD requirements
- Professional standards
- Monitoring/disciplinary procedures
- Complaint systems
When can conflicts arise?
Between
- firm and client
- 2 clients (managed by same firm)
If a conflict of interest is identified, what steps should be taken?
- Notify relevant parties of any actual/potential conflict(s) of interest
- Obtain consent from relevant parties to act
- If consent is refused, cease acting for one party involved in the conflict
- If consent is granted
- Use separate eng teams
- Impose procedures to team members, on both eng teams, in relation o security and confidentiality
- Use confidentiality agreements for partners/employees
- Regular review of safeguards by senior members of staff not involved w conflicting eng
- if conflict can’t be resolved consider not accepting/resigning from one eng
How would you address the follow situation?
Work in ICAEW acc, man taken of clients prev looked after by her fiancé who moved to another firm. You notice errors made by her fiancé, and clients will need to be notified and will face penalties
Consider following factors:
- Relevant facts (actual errors in the returns signed off by him)
- ethical issues involved (normally refer this matter to man, who is eng to error maker)
- Relevant fundamental principles (obj, professional competence and due care)
- Any established internal procedures (e.g. referring directors/partner overseeing work)
- possible alternative courses of actions
If remains unresolved, seek advice within their firm and document advice given
Define tax avoidance
Is using any legal method to reduce an entity’s tax burden, even if the method isn’t following the intent of the law
E.g. artificially using foreign jurisdictions with low rates
Is tax avoidance legal?
What are the issues with it
No illegal
But morally questionable and isn’t always effective
Why are tax avoidance measures not always effective?
- Promoters of tax avoidance schemes are now required to disclose details to HMRC, enabling HMRC to close loopholes quickly
- The courts may disregard elements of transactions that have no commercial purpose i.e. where they have been designed with the main aim of avoiding tax
- General anti-abuse rule (GAAR) enables HMRC to challenge abusive tax avoidance arrangements
Longstanding client is owned 50:50, and one is considering selling shares to the other and retired. Both SH asked the firm to advise them on the sale. What steps would you take to address this situation?
Confict of interest arisen as asked to act for seller and buyer
Take following steps
- Notify both of conflict
- Obtain consent from relevant parties to act
- If consent is refuted, either refuse to act for one or both
- If granted consent, use separate eng teams, improve procedures to prevent access to info, issue guidelines to team members
