Threats and safeguards to fundamental ethical principles

Question 1

What is a conceptual Framework?

Answer 1

Set of principles to help accountants to act ethically

Question 2

What is a principles based approach?

Answer 2

Use the conceptual framework to identify and evaluate threats to the fundamental ehtical principles.

Question 3

What is a Rules based approach?

Answer 3

Applying any rules exactly as stated regardless of the circumstances.

Question 4

Name 5 threats to the fundamental ethical principles?

Answer 4

Self-interest threat
Self-review threat
Familiarity threat
Intimidation threat
Advocacy threat.

Question 5

What is a self interest threat?

Answer 5

Occurs when there is a financial interest or other interest that will inappropriately influence the accountants judgement or behaviour.

Question 6

What is a self review threat?

Answer 6

Occurs when an accountant has to re evaluate a judgement or data they have previously made or produced

Question 7

What is a familiarity threat?

Answer 7

These may occur when a close or personal relationship influences the accountant decisions

Question 8

What is a intimidation threat?

Answer 8

May occur when an accountant is deterred from acting a certain way because of real or percieved threats

Question 9

What is an advocacy threat?

Answer 9

May occur when an accountant promotes a position or an opinion to the point where their objectivity may be comprimised in the future.

Question 10

Name some safegaurds against threats to the fundamental ethical principles?

Answer 10

Strong internal controls
Appropriate disciplinary processes

Question 11

What are the advantages of a principles based approach?

Answer 11

Applicable to all circumstances
Less chance of finding loopholes