Module 10 Flashcards
(27 cards)
What are the 5 fundamental principles of the ICAS code of ethics?
Confidentiality Objectivity Professional competence and due care Integrity Professional behaviour
What is moral courage?
Need to act in accordance with the fundamental principles
What is independence?
Freedom from conditions and relationships that would impair integrity or objectivity
Natural scepticism of public would only be overcome if?
Properly monitored standards established evidence
Properly enforced
What are the two facets of independence? Ethical standards issued by financial reporting council
Fact of independence
Appearance of independence
What are the two sections of the Ethical Standard?
Part A: integrity and objectivity, independence. Overarching principles and provisions
Part B: specific ethical matters sections 1-6
General
Financial, bus, employ and personal relations
Long association
Fees, remuneration etc
Non audit
Provisions for small entities
Who is a covered person?
Person in a position to influence the conduct or outcome for be engagement: Includes - each member - quality control review person - involved in audit - supervisory/management
What are the six categories of threat that may affect independence?
Management Advocacy Self interest Self review Intimidation Familiarity
MASSIF
Once threat identified, auditor should:
Eliminate
Or reduce to acceptable level
By applying procedures/safeguards
Ethics partner is?
Nominated partner responsible for adequacy of policies and procedures and ensuring communicated on ES
Communicate all facts and matters that impact integrity objectivity and independence, PIE ensure audit committee provided with:
Written disclosure of relationships Detail non audit services Confirmation of independence Details of inconsistencies Opportunity to discuss
What is a public interest entity?
Listed on LSE
All credit institutions
All insurance undertakings
Sections 2-5 scenarios contain
Scenarios where auditor independence might be threatened
Some can be safeguarded against, identified by ES
PIE prohibited non-audit services for audit firms
Tax Management Bookkeeping and accounts Payroll Valuation Internal audit
Affected areas of SOX independence?
Prohibition of non-audit services
Pre-approval of services
Audit partner rotation- every 5 years
Conflicts of interest- prohibits if CEO, CFO, CAO employed by the firm and participated in year preceding
Sections 3-5 of ethical standards contain?
- Long association with engagements
- Fees remuneration and evaluation policies
- Non-audit/additional services
Threats of longstanding association with the audit engagement?
Familiarity
Self interest
Self review
Specific safeguards for PIE and listed companies audits with long-standing association?
Engagement partner rotated after 5 Can extend to 7 Not return for 5 EQCR rotates after 6, not return for 5 Key partner rotate after 7, not return for 2
Contingent fees threat?
Self interest
Contingent = certain outcome
Fees should reflect time skills and experience
Overdue audit fees threat?
Self interest
Dependence on non audit service threat?
Self interest
Intimidation
Dependence on one client threat?
Self interest
Intimidation
If fees exceed 10% PIE/listed or 15% non listed of annual fee income of audit firm then firm should resign
Remuneration for selling non-audit services threat?
Self interest
Gifts and hospitality threats?
Familiarity
Self interest
