Codes Of Professional Ethics

Question 1

Why is ethics important to accountants?

Answer 1

Hold position of trust

With investors, managers, employees, banks and other stakeholders relying on their work

Question 2

2 things ethical codes aim to do

Answer 2

1. Ensure accountants act professionally
2. Help profession act in public interest
   (By regulation)

Question 3

Consequence of accountant not following ethical standards

Answer 3

Disciplinary action

Question 4

General sources of ethical guidance

Answer 4

Most professional bodies

Question 5

Who do ethical guidance apply to?

Answer 5

All members
Not just those in practice

Question 6

Ethical codes applicable to ICAEW accountants

Answer 6

1. IFAC code of ethics
   /IESBA code of ethics for professional accountants
2. ICAEW code of ethics
3. FRC ethical standard

Question 7

IFAC

Answer 7

International Federation of Accounts

Question 8

Ethical body of the IFAC

Answer 8

IESBA

Question 9

IESBA

Answer 9

International Ethics Standard Board for Accountants

Question 10

Who does the ICAEW code also apply to?

Answer 10

Trainees

Volunteers

Question 11

Who does the FRC ethical standard apply to?

Answer 11

UK Auditors

Question 12

What approach do most professional bodies have to ethics?

Answer 12

Principles based

including IESBA, ICAEW, FRC

Question 13

Who does the IESBA ethical code apply to?

Answer 13

All professional accountants

Question 14

IESBA five ethical principles

Answer 14

1. Integrity
2. Objectivity
3. Professional competence and due care
4. Confidentiality
5. Professional behaviour

Question 15

Integrity

Answer 15

Straightforward
Honest
In all professional and business relationships

Question 16

Objectivity

Answer 16

No bias
Or conflict of interest
In business judgements

Question 17

Professional competence and due care

Answer 17

Maintain professional knowledge
And skill
At an appropriate level
And follow professional standards

Question 18

Confidentiality

Answer 18

Not disclosing info on clients
Without appropriate authority
Or used for personal advantage

Question 19

Professional behaviour

Answer 19

Comply with relevant laws
Avoid actions that would discredit the profession

Question 20

Assurance providers: Independence

Answer 20

Should be, and be seen to be, independent

Question 21

Independence

Answer 21

State of mind
That permits the expression of a conclusion
Without being affected by influences
That compromise professional judgement

Question 22

IESBA approach to independence issues

Answer 22

1. Identify threats
2. Evaluate significance
3. Identify
   And apply
   Standards

Question 23

Safeguards

Answer 23

Steps taken to eliminate the threat

Or reduce it to an adequate level

Question 24

What should the accountant do if there are no safeguards available?

Answer 24

1. Eliminate interest
   Or activities
   Causing the threat
2. If this is not possible:
   Decline or discontinue the engagement

Question 25

FRC 5 general sources of threat to independence

Answer 25

1. Self-internet
2. Self-review
3. Familiarity
4. Advocacy
5. Intimidation

Question 26

Self interest

Answer 26

Of the audit firm

E.g. owning shares in client

Question 27

Self review

Answer 27

By others in the audit firm

E.g. Auditing FS prepared by the audit firm

Question 28

Familiarity

Answer 28

Of work done by the audit client

E.g. close family working in client’s accounts department

Question 29

Advocacy

Answer 29

Takes management’s side

E.g. promoting client’s shares in a share issue

Question 30

Intimidation

Answer 30

Influenced by fear

E.g. client threatens auditor

Question 31

IESBA 2 categories of general safeguards for independence

Answer 31

1. Safeguards created by profession, legislation or regulation
2. Safeguards within the work environment

Question 32

Safeguards created by the profession, legislation or regulation examples

Answer 32

Education and training
CPD requirements
Corporate governance regulations
Professional standards
Monitoring of progressional work e.g. disciplinary proceedings
External reviews

Question 33

Safeguards within the work environment examples

Answer 33

Review procedures
Consultations with independent 3Ps
Rotation of senior staff
Discussions with governance
Disclosing fees and services to governance

Question 34

What does the ICAEW code incorporate?

Answer 34

IESBA code

But also contains additional rules deemed appropriate by the ICAEW

Question 35

What will the FRC be replaced by in 2023?

Answer 35

ARGA

Question 36

ARGA

Answer 36

Audit, Reporting, and Governance Authority

Question 37

FRC additional threat to independence

Answer 37

Management

Question 38

Management threat to independence

Answer 38

Closely aligned with client management

E.g. implementing accounting IT systems for a client