Chapter 2 & 3 Flashcards
APES 110 sets out:
main ethical pronouncements that relate to the undertaking of an audit.
Fundamental principles in the code of ethics:
- integrity
- objectivity
- professional competence and due care
- confidentiality
- professional behaviour (APES 110, s 100.5).
- Independence: ethical requirements
Test for independence is:
reasonable person test: Would a reasonable person having access to all facts consider that the auditor was independent? (APES 110, s 290.6)
Ethical rules on independence emphasise both (APES 110, s 290.6):
i. Perceived independence
ii. Actual independence
APES 110, s 200: Threats to independence:
- Self-interest threat
- Self-review threats
- Advocacy threats
- Familiarity threats:
- Intimidation threats
APES 110, s 200: Safeguards to threats to independence:
1) Safeguards created by the profession, legislation or regulation—education, professional standards, monitoring and disciplinary processes, and inspections and reviews.
2) Safeguards within the work environment (firm wide and engagement specific)—independence and quality control policies and procedures.
American Accounting Association (AAA) is the model that:
suggests a logical, seven-step process for decision making, which takes ethical issues into account:
7 steps of the AAA model:
- Determining the facts
- Determine ethical issues
- Identify major principles, rules and values
- Specify alternative course of actions
- Compare values of alternatives
- Assess the consequences:
- Make your decision