Code of Ethics

Question 1

Who developed the code of ethics?

Answer 1

IESBA (International Ethics Standard Board of Accountants)

Question 2

What is the distinguishing mark of being a CPA?

Answer 2

responsibility to the public

Question 3

Code of Ethics only applies to CPA in Public Practice and CPA in Business. True or False?

Answer 3

False (all CPA)

Question 4

Parts of Code of Ethics

4 Parts

Answer 4

• Part 1 - Compliance with Code, Fundamental Principles, and Conceptual Framework
• Part 2 - Professional Accountants in Business
• Part 3 - Professional Accountants in Public Practice
• Part 4 - International Independence Standards
  4A - Independence for Audit & Reviews
  4B - Independence for Assurance
  Engagements

Question 5

Part 1 - Compliance with Code, Fundamental
Principles, and Conceptual Framework

Conflict with law

Answer 5

• law prevails, comply with all other parts of the code

Question 6

Part 1 - Compliance with Code, Fundamental
Principles, and Conceptual Framework

Fundamental Principles (COBID)

Answer 6

Confidentiality
- no disclosure unless required or authorized
- continues EVEN after the END of relationship with client

Objectivity

Professional Behavior
- comply with laws and regulations
- avoid actions that will discredit the profession

Integrity
- straightforward and honest

Professional Competence and Due Care
- 2 stages : Attainment & Maintenance
- Act diligently in applying standards

Question 7

Part 1 - Compliance with Code, Fundamental
Principles, and Conceptual Framework

Threats to Independence (SISRAFI)

Answer 7

Self-Interest
- Financial or other interest

Self-Review
- Siya rin gumawa ng iaaudit

Advocacy
- Promote the client’s position

Familiarity
- Long or close relationship with client
- Too sympathetic

Intimidation
- Actual or perceived pressure
- Undue influence

Question 8

Part 1 - Compliance with Code, Fundamental
Principles, and Conceptual Framework

Conceptual Framework (3-Step Approach)

Answer 8

• Identify threats
• Evaluate threats
• Address threats
  1. Eliminate
  2. Apply safeguards (reduce to acceptable level)
  3. Decline or end (last resort)

Question 9

Receiving gift from clients is prohibited. True or False?

Answer 9

• If the amount of gift is trivial, it is acceptable

Question 10

Some Notes:
- second opinions
- fee
- custody of client asset

Answer 10

• second opinions → may be a threat
• can quote whatever fee deemed appropriate (should be not so low compared to others)
• don’t take custody of client asset, if permitted
  1. separate from own asset
  2. account for income

Question 11

Independence of Minds vs Independence in Appreance

Answer 11

Independence of Mind (own perception)
- The state of mind that permits the expression of a conclusion without being affected by influences that compromise professional judgment, thereby allowing an individual to act with integrity, and exercise objectivity and professional skepticism.

Independence in Appearance (public perception)
- The avoidance of facts and circumstances that are so significant that a reasonable and informed third party would be likely to conclude that a firm’s or an audit or assurance team member’s integrity, objectivity or professional skepticism has been compromised.

Question 12

Financial Interest
- Direct
- Indirect

Answer 12

Direct
- Material → X
- Immaterial → X

Indirect
- Material → X
- Immaterial → ✓

Question 13

Loans and Guarantees
- Bank
- Non Bank

Answer 13

Bank
- Material → X
- Immaterial → ✓

Non Bank
- Material → X
- Immaterial → ✓

Question 14

Contingent and Outstanding Fees are allowed. True or False?

Answer 14

False

Question 15

Advertising, Solicitation, and Referral Fee are allowed. True or False?

Answer 15

False

Question 16

Rotation Period

Public Entity vs Non Public Entity

Answer 16

PUBLIC INTEREST ENTITY
- 7 years “time-on period”
- after the time-on period, there’s a “cooling-off” period
1. 5 years - Engagement Partner
2. 3 years - Engagement Quality Control Reviewer (EQCR)
3. 2 years - Other KAP Role

NON PUBLIC INTEREST ENTITY
- determine an appropriate period