Ethics

Question 1

5 key elements of code of ethics

Answer 1

• conceptual framework
• fundamental principles
• threats and safeguards
• confidentiality
• conflicts of interests

Question 2

independence

Answer 2

freedom from situations/relationships where objectivity would be perceived t be impaired by a reasonable and informed third party

Question 3

2 main approaches for conceptual framework

Answer 3

• rules based
• principle based

Question 4

features of rule based approach

Answer 4

• easier to follow
• rules need frequent updating and encourages narrow interpretation

Question 5

5 features of principle based approach

Answer 5

• flexible, can be used in usuals or rapidly changing circumstances
• applied across borders
  accountant uses professional judgement
• requires compliance with spirit of the guidance
• still includes rules for common situations

Question 6

what approach does conceptual framework use

Answer 6

principal based

Question 7

5 fundamental ethical principles

Answer 7

• integrity
• objectivity
• professional competence and due care
• confidentiality
• professional behaviour

Question 8

integrity

Answer 8

be honest and straightforward in business relationships

Question 9

objectivity

Answer 9

bias, conflict of interest or undue influence of others shouldnt be allowed to affect professional judgement

Question 10

professional competence and due care

Answer 10

maintain professional knowledge and skill, act diligently with professional standards

Question 11

confidentiality

Answer 11

info on clients can’t be disclosed without proper authority or used for personal advantage

Question 12

professional behaviour

Answer 12

comply with relevant laws and avoid actions that wold discredit the profession

Question 13

4 threats to independence and objectivity

Answer 13

• self interest
• familiarity
• self review
• advocacy

Question 14

self interest threats

Answer 14

where auditor has financial/other interest that can inappropriately influence judgement or behaviour

Question 14

8 examples of self interest threat

Answer 14

• owning shares in client
• fee dependence
• gifts and hospitality
• employment with client
• overdue fees
• contingent fees
• compensation/evaluation
• litigation

Question 15

familiarity threat

Answer 15

audio becomes too sympathetic or trusting of client and no longer apples professional scepticism

Question 16

3 examples of familiarity threat

Answer 16

• long association
• personal relationships
• movement of staff between firms and client

Question 17

advocacy threat

Answer 17

promoting position of client or representing them in some way

Question 18

3 examples of advocacy threat

Answer 18

• representing client
• promoting client
• negotiating on behalf of client

Question 19

self review threat

Answer 19

auditor unlikely to admit to errors in their own work

Question 20

3 examples of self review threat

Answer 20

• account preparation
• internal audit
• tax comps

Question 21

auditor has duty of confidentiality except in following 3 situations

Answer 21

• disclosure permitted by law and authorised by client
• disclosure required by law, eg fraud
• there is a professional duty or right to disclose eg comply with quality review by professional body, respond to enquiry by regulatory body

Question 22

conflict of interest

Answer 22

when same firm used to 2 companies that interact with each other, in the same market or trade with each other