5 key elements of code of ethics
- conceptual framework
- fundamental principles
- threats and safeguards
- confidentiality
- conflicts of interests
independence
freedom from situations/relationships where objectivity would be perceived t be impaired by a reasonable and informed third party
2 main approaches for conceptual framework
- rules based
- principle based
features of rule based approach
- easier to follow
- rules need frequent updating and encourages narrow interpretation
5 features of principle based approach
- 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
what approach does conceptual framework use
principal based
5 fundamental ethical principles
- integrity
- objectivity
- professional competence and due care
- confidentiality
- professional behaviour
integrity
be honest and straightforward in business relationships
objectivity
bias, conflict of interest or undue influence of others shouldnt be allowed to affect professional judgement
professional competence and due care
maintain professional knowledge and skill, act diligently with professional standards
confidentiality
info on clients can’t be disclosed without proper authority or used for personal advantage
professional behaviour
comply with relevant laws and avoid actions that wold discredit the profession
4 threats to independence and objectivity
- self interest
- familiarity
- self review
- advocacy
self interest threats
where auditor has financial/other interest that can inappropriately influence judgement or behaviour
8 examples of self interest threat
- owning shares in client
- fee dependence
- gifts and hospitality
- employment with client
- overdue fees
- contingent fees
- compensation/evaluation
- litigation
familiarity threat
audio becomes too sympathetic or trusting of client and no longer apples professional scepticism
3 examples of familiarity threat
- long association
- personal relationships
- movement of staff between firms and client
advocacy threat
promoting position of client or representing them in some way
3 examples of advocacy threat
- representing client
- promoting client
- negotiating on behalf of client
self review threat
auditor unlikely to admit to errors in their own work
3 examples of self review threat
- account preparation
- internal audit
- tax comps
auditor has duty of confidentiality except in following 3 situations
- 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
conflict of interest
when same firm used to 2 companies that interact with each other, in the same market or trade with each other
