ethics (term 3) Flashcards

Question

# confidentiality What must Chartered Accountants respect in their work?

Answer 1

Confidential information from professional and business relationships.

Answer 2

Social settings, with business associates, and with immediate family

Answer 3

Within the firm/employer and from prospective clients/employers.

Answer 4

Only with specific authority.

Answer 5

Personal gain, third-party gain, and use/disclosure after a relationship ends.

Answer 6

They also respect confidentiality.

Answer 7

circumstances where it may be required to disclose confidential information: 1. Permitted by law or authorised by client, for example: - Production of documents in legal proceedings or - Disclosure to public authorities of infringement (including reportable irregularities – s45 APA) 2. Professional duty or right to disclose if not prohibited by law: - To comply with the quality review of the Regulatory Board or professional body - To respond to an inquiry or investigation by the Regulatory Board or other regulatory body - To protect the professional interests of a chartered accountant in legal proceedings - To comply with technical standards and the requirements of the Code

Answer 8

* If the interest of all parties (including third parties) can be harmed if client consents to disclosure. * If all information is known and substantiated, and if not use professional judgement to decide on the type of disclosure. * Type of communication and to whom it is addressed. * Are the recipients to whom the information is communicated to, appropriate?

Answer 9

exclusions: * With permission of the client * Legal obligation to disclose * Professional duty disclosure considerations: * Any parties interest harmed * If information is known and substantiated * Type of communication expected * Recipient deems it appropriate

Answer 10

The professional accountant should avoid: - Bringing the profession into disrepute by knowingly engaging in such practices. - Actions that bring that a reasonable informed third party would be likely to conclude as having adverse effects on the reputation of the profession.

Answer 11

* Marketing and promoting themselves and their work * They must not bring the profession in discredit or disrepute but must be honest and truthful. * Not make exaggerated claims for services able to offer, qualifications or experience. * Not disparaging references or unsubstantiated comparisons to the work of others.

Answer 12

* Chartered Accountants may be associated with more than one auditing or professional service firm, but there must be a clear distinction of the firms. * May practice under different firms’ names for different offices – as long as it is not misleading. * Must be distinction between firms and members who are not registered, auditors. * Must comply with S 41(1) and/or S 41(2) of APA.

Answer 13

* An accountant shall not delegate the power to sign an audit, review or other assurance reports to any person who is not a partner or fellow director. * Exceptions: If an emergency arises, in such a case the full circumstances for the need to delegate must be reported to the client and IRBA. * Any audit, review or report must contain: - The accountant's full name - The capacity in which the person is signing - CA(SA) or other designation under the person’s full name - Firms name of accountant if it is not set out on letterhead

Answer 14

May not directly or indirectly offer employment to an employee of another charted accountant without informing the latter.

Answer 15

* Conduct in a manner which will promote co-operation and good relations. * Help others to comply with the code. * Co-operate with appropriate disciplinary authorities in applying the code.

Answer 16

* Eliminate the circumstances creating the threat. * Apply safeguards. * Decline or end the specific professional activity.

Answer 17

* A chartered accountant in pubic practice must resign from the engagement. * A chartered accountant in business must resign from the organisation.

Answer 18

* Exercise professional judgement * Remain alert to new information and changes * Use reasonable and informed third party test

Answer 19

Conflict of interest creates a threat to objectivity and possibly other fundamental principles.

Answer 20

* The CA undertakes a professional activity related to a particular matter for two or more parties whose interests regarding the matter are in conflict. * The interests of the CA regarding a particular matter and the interests of a party for whom the CA undertakes a professional activity related to that matter are in conflict.

Answer 21

* How threats were addressed to relevant parties. * Consent from relevant parties (also implied). * Nature of conflict of interest.

Answer 22

* The nature of relevant interests and relationships between involved parties. * The activity and its implication for involved parties. * In general: more direct connections cause threats to be more likely not at an acceptable level.

Answer 23

* Withdrawing from decision-making process. * Restructuring/segregating responsibilities and duties. * Obtaining appropriate oversight.

Answer 24

* Preparing misleading information creates self-interest and intimidation threats to objectivity, integrity and professional competence and due care.

Answer 25

* Preparing misleading information creates self-interest and intimidation threats to objectivity, integrity and professional competence and due care. * Prepare or present the information in accordance with a relevant reporting framework, where applicable. * Prepare or present the information in a manner that is intended neither to mislead nor influence contractual or regulatory outcomes inappropriately.

Answer 26

* Not omit anything with the intention of rendering the information misleading or of influencing contractual or regulatory outcomes inappropriately. * Exercise professional judgment to: - Represent facts accurately and completely in all material respects, - Describe clearly the true nature of business transactions or activities, and * Classify and record information in a timely and proper manner.

Answer 27

* Discuss concerns with superiors, management or those charged with governance. * Discuss the policies and procedures of the employing organisation on how to address the matter internally (especially whistle- blowing policies). * Consulting with SAICA (a relevant professional body), the internal or external auditor of the employing organisation and/or legal counsel. * Determining whether any requirements exist to communicate to third parties, including users of the information and regulatory and oversight authorities. * If these safeguards cannot be implemented, the professional accountant shall refuse to be or to remain associated with the information. * In such circumstances, it might be appropriate for a professional accountant to resign from the employing organisation.

Answer 28

* Acting without sufficient expertise creates a self-interest threat to compliance and due care.

Answer 29

* The extent to which the professional accountant is working with others. * The relative seniority of the professional accountant in the business. * The level of supervision and review applied to work.

Answer 30

* Obtaining assistance from someone with the necessary expertise, and * Ensuring that there is adequate time available for performing the relevant duties.

Answer 31

Offering or accepting inducements might create a self-interest, familiarity or intimidation threat, particularly to integrity, objectivity and professional behaviour.

Answer 32

Offering or accepting inducements might create a self-interest, familiarity or intimidation threat, particularly to integrity, objectivity and professional behaviour.

Answer 33

* Inform senior management or those charged with governance of the employing organisation. * Amend or terminating the business relationship with the offeror.

Answer 34

* Threat to objectivity may be created when a CA competes directly with a client or has a joint venture or similar arrangement with a major competitor of a client. * A threat to objectivity or confidentiality may also be created when a CA performs services for clients whose interests are in conflict or the clients are in dispute with each other in relation to the matter or transaction in question

Answer 35

* Before accepting a new client, engagement or business relationship the professional accountant shall: - Take reasonable steps to identify conflict of interest. - Identify the nature of interests and relationships as well as the service and its implications for relevant parties. * The existence of separate practice areas for speciality functions within the firm – which may act as a barrier for passing confidential information. * Policies and procedures to limit access to client files. * Confidentiality agreements signed by personnel and partners. * Separation of confidential information physically and electronically. * Specific and dedicated training and communication.

Answer 36

* Disclosure and consent may take different forms: - General disclosure to clients that a professional accountant cannot provide professional services exclusively for one client. - Specific disclosure to affected clients of the conflict of interest and how threats will be addressed – enabling the client to make an informed decision. - Implied consent by the client’s conduct after a detailed presentation of the circumstances has been made to the client and if they do not raise an objection to the existence of the conflict.

Answer 37

* Having separate engagement teams who are provided with clear policies and procedures for maintaining confidentiality. * Having an appropriate reviewer who is not involved in providing the service or affected by the conflict of interest that can review the work and assess key judgements. * Notifying the client of the firm’s business interest or activities that may represent a conflict of interest and obtaining their consent in writing to act in such circumstances. * Notifying all known relevant parties that the CA is acting for two or more parties in respect of a matter where their respective interests are in conflict and obtaining their consent to so act * Where a conflict of interest creates a threat cannot be eliminated or reduced the CA shall not accept a specific engagement or shall resign from one or more conflicting engagements.

Answer 38

* Client may be involved in illegal activities, dishonesty, questionable financial reporting practices or unethical behaviour. * Creates a self-interest threat to integrity or professional behaviour. * If the engagement team does not process or cannot acquire competencies to perform professional services: - Creates a self-interest threat to professional competence and due care.

Answer 39

* Knowledge and understanding of the client, the industry, the owners, management and those charged with governance and business activities. * The client’s commitment to addressing the questionable issue, for example through improving corporate governance practices and internal control. * Experience with relevant regulatory and reporting requirements. * There must be an appropriate understanding of: - The nature of the client’s business - The complexity of its operations - The requirements of the engagements, and - The purpose, nature and scope of the work. - Knowledge of relevant industries. - Experiences with relevant regulatory or reporting requirements.

Answer 40

* Assigning enough engagement personnel with the required competencies. * Agreeing on a realistic time frame for performance. * Using experts where needed.

Answer 41

* If a threat created by facts and circumstances cannot be corrected by applying a safeguard. * Self-interest threat to compliance with the principle of professional competence and due care if: - An account accepts the engagement before knowing all the facts. - Acts on incomplete information

Answer 42

Whether the client states before accepting the engagement contract that contact with the previous accountant must be requested in order to obtain relevant information.

Answer 43

* Asking the current or previous account to provide any known information that the proposed accountant should be aware of before accepting the engagement. * Obtaining information through other sources such as inquiries of other parties or background investigations of senior management and governance of the client. * The proposed accountant shall treat information in confidence and give weight to any information provided by the existing accountant.

Answer 44

Confidentiality should be respected during changes in appointment. * The new accountant needs the client’s permission to initiate discussions with the previous auditor. * The old accountant must ensure the client’s permission is obtained and also whether the legal and ethical requirements are met. * If the client refuses permission, the new auditor should decline the position, unless there are exceptional circumstances. * Other means of enquiry include: Third parties and performing background checks. * If it is a recurring client engagement – must continuously review whether to continue with the engagement. * If the work of an expert is used: - Determine whether the use is warranted. - The skills, resources and experience of the expert. - Their ethical standards and reputation.

Answer 45

A self-interest threat to the compliance with the principle of professional competence and due care can be created if the second opinion is based on inadequate information.

Answer 46

The circumstances of the request and all the other available facts and assumptions relevant to the expression of a professional judgement.

Answer 47

* With permission from the client, obtaining information from the existing or predecessor accountant. * Describing the limitations surrounding any opinion in communications with the client. * Providing the existing or predecessor accountant with a copy of the opinion.

Answer 48

The level of fees creates a self-interest threat to compliance with the principle of professional competence and due care if the fee quoted is so low that it might affect the ability to perform the engagement up to the expected standards

Answer 49

* Whether the client is aware of the terms of the engagement and the basis on which the fees are charged. * Whether the level of the fee is set by an independent third party such as a regulatory body.

Answer 50

* Adjusting the level of fees or the scope of the engagement. * Having an appropriate reviewer to assess the work performed.

Answer 51

These are fees charged for certain non-assurance services which create a self-interest threat to objectivity.

Answer 52

* The nature of the engagement and the range of possible fee amounts. * The basis for determining the fee. * Disclosure to the intended users of the work performed. * Quality control policies. * Whether an independent third party is used to review the outcome and set the level of fee.

Answer 53

* Having an appropriate reviewer who is not involved in performing the non-assurance service review. * Obtaining an advance written agreement with the client on the basis of remuneration.

Answer 54

* A fee is paid to another accountant for the purposes of obtaining new client work if the accountant requires specialist services not offered. * A fee received for referring a continuing client to another accountant or expert if the existing accountant cannot provide the services required. * Commission received from a third party in connection with the sale of goods or services of the client. * NB! An accountant shall not charge contingent fees for the preparation of or amendment to any tax returns as contingent fees for these services create a self-interest threat to objectivity that cannot be eliminated and safeguards are not capable of reducing the threat.

Answer 55

A self-interest threat to compliance with the principles of objectivity and professional competence and due care is created if the accountant: - Pays or receives a referral fee or, - Receives commission relating to a client.

Answer 56

* Whether the client is aware of the terms of the engagement and the basis on which the fees are charged. * Whether the level of the fee is set by an independent third party such as a regulatory body

Answer 57

* Obtaining an advanced agreement upfront and in writing from the client for commission agreements. * Disclosing to clients upfront and in writing any referral fees or commission agreements paid to or received from other accountants.

Answer 58

* Self-interest or familiarity threat is created to integrity, objectivity and professional behaviour when an auditor or their immediate family is offered gifts by a client. * An intimidation threat to objectivity is created when the client threatens to make these offers public.

Answer 59

* The intention behind the gift. * The nature, frequency and value * The timing of when it is given * Whether it is customary or cultural or an ancillary part of the service * The degree of transparency * Whether it is limited to the recipient or available to the broader group * Apply the reasonable third-party test

Answer 60

* Informing senior management who are charged with governance of the client regarding the offer. * Amending or terminating the business relationship with the client

Answer 61

* Self-interest or familiarity threat is created to integrity, objectivity and professional behaviour when an auditor or their immediate family is offered gifts by a client. * An intimidation threat to objectivity is created when the client threatens to make these offers public.

Answer 62

* Self-interest: The auditor is offered hospitality from a client while providing services. * Familiarity: Regularly takes the client to sporting events. * Intimidation: Accepts hospitality – the nature of which could seem inappropriate if publicly disclosed (RTP)

Answer 63

* The intention behind the gift. * The nature, frequency and value * The timing of when it is given * Whether it is customary or cultural or an ancillary part of the service * The degree of transparency * Whether it is limited to the recipient or available to the broader group * Apply the reasonable third-party test

Answer 64

* Declining the offer (eliminates) * Transferring the service to another auditor whose connection with the client would not be deemed to be inappropriate (eliminates). * Being transparent with senior management (reduces). * Registering the inducement in a log monitored by senior management (reduces).

Answer 65

A self-interest threat to professional behaviour and objectivity can arise from holding client’s assets while providing services to them

Answer 66

* Make enquiries about the source of the assets and * Consider legal requirements such as the client’s proof of residence and identification as set out by FICA.

Answer 67

A self-interest threat to professional behaviour and objectivity can arise from holding client’s assets while providing services to them.

Answer 68

* A professional accountant is required to: - Comply with the relevant laws and regulations - Keep the assets separate from personal and firm’s assets - Use the assets only for their intended use - Be ready at any time to account for the assets * For all client’s monies for which the accountant is liable: - The monies cannot be referred to as being in a ‘trust account’ = misleading. - Separate bank accounts must be registered - The accounts must be separately named - The money must be deposited into an appropriate bank account without any delay - All records must be maintained and readily available - Reconciliations between the designated bank account and the client’s monies ledger accounts. - The money should not be held indefinitely * For property other than money for which the accountant is liable: - The monies cannot be referred to as being in a ‘trust account’ = misleading. - All records must be maintained and readily available - All documentation should be safeguarded against unauthorised use.

Answer 69

* Utilise umbrella accounts with sub-accounts for each client. * Open separate accounts with power of attorney if the money is kept for long periods. * Ensure the firm’s indemnity and fidelity insurance is sufficient, and * The risks and responsibilities should be addressed in an engagement letter if there is one.

Answer 70

The state of mind that permits the expression of a conclusion without being affected by influences that compromise professional judgement, thereby allowing an individual to act with integrity and to exercise objectivity and professional scepticism.

Answer 71

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

Answer 72

Self-interest or intimidation threat might be created for independence (objectivity) when the total audit fees of a client represent a large part of the firm’s total income.

Answer 73

* Operating structure of the firm * Whether the firm is well established or new * Significance of the client qualitatively and or quantitatively to the firm.

Answer 74

* Increase the client base * Have an appropriate reviewer

Answer 75

Self-interest threat might be created for independence if the fees are due by the client and not settled before the auditor’s report for the following year is issued

Answer 76

Whether the overdue fees are regarded as a loan to the client

Answer 77

* Obtaining partial payment of overdue fees * Having an additional professional accountant who was not on the audit team who reviewed the work.

Answer 78

Self-interest, familiarity or intimidation threat to the compliance with the fundamental principles of integrity, objectivity and professional behaviour.

Answer 79

* The intention behind the gift. * The nature, frequency and value * The timing of when it is given * Whether it is customary or cultural or an ancillary part of the service * The degree of transparency * Whether it is limited to the recipient or available to the broader group

Answer 80

* Do not accept gift * Policy to prevent accepting gifts * Any gifts accepted must be approved by firm’s quality review panel and senior management must be informed. * Amending or terminating the business relationship with the client.

Answer 81

* Financial interests may include direct and material indirect financial interest in the client held by an audit team member, immediate family members of the team or the audit firm. * Includes owning shares and collective investments.

Answer 82

Creates a self-interest threat to independence.

Answer 83

* The role of the person holding the interest * Whether it is a direct or indirect interest * The materiality of the interest

Answer 84

* Selling the direct financial interest or selling a sufficient portion of the material indirect financial interest in order to make it immaterial to the accountant and their close or immediate family. * Having another professional accountant review the work done by the accountant with the interest. * Removing the individual who is faced with self-interest threats.

Answer 85

* This applies to the firm, individuals on the audit team and their immediate family members. * If the audit client is a bank or similar institution: - The firm may only have a loan or deposits or a brokerage account unless it is made under normal lending conditions and procedures. - However, if it is material to the client it may still create a self- interest threat. * If the audit client is not a bank or similar institution: - The firm shall not have a loan from the client or any director or officer of the client unless the loan is immaterial to the firm and client.

Answer 86

* Creates a self-interest threat to independence.

Answer 87

The materiality of the loan or guarantee to the individual and their immediate family members

Answer 88

Having the work reviewed by an appropriate reviewer who is not an audit team member and is not a beneficiary to the loan

Answer 89

Creates a self-interest or intimidation threat to independence if there is a close business relationship between the client, management or the immediate family of the audit team member.

Answer 90

* The materiality of the financial interest and, * The significance of the business relationship.

Answer 91

* Having the work reviewed by an appropriate reviewer who is not an audit team member and is not a beneficiary to the loan. * Eliminating or reducing the magnitude of the transaction. * Removing the individual from the audit team.

Answer 92

Self-interest, familiarity or intimidation threat might be created by family and personal relationships threat to independence (objectivity).

Answer 93

* The nature of the relationship between the audit team member and close family member. * The position held by the close family member. * The role of the audit team member.

Answer 94

* Remove the individuals from the audit team * Structuring the responsibilities of the audit team so that the team member does not deal with matters relating to close family members.

Answer 95

* Close or immediate family members of an audit team member is: - A director or officer of the audit client - An employee in a position to exert significant influence over the preparation of client’s accounting records or the financial statements.

Answer 96

Creates a self-interest, self-review and familiarity threat if an audit team member has recently served as a director, officer or employee of the audit client.

Answer 97

* The position of the individual held with the client * The length of time since the individual left the client * The role of the audit team member

Answer 98

* The audit team should not include an individual who at any time during or before the audit report served as a director, officer or employee to the client where they would have been able to exert significant influence on the decisions. * Have an appropriate reviewer review the work performed by the audit team member.

Answer 99

* Director or officer: Self-review and self-interest threats for objectivity are created. * Secretary: Self-review and advocacy threats. * Therefore, it is too significant for a safeguard to bring the threat to an acceptable level.

Answer 100

* Specifically allowed by local laws and professional rules and, * Management makes all the decisions and * Company secretary’s responsibilities are limited to routine and administrative tasks.

Answer 101

Creates a self-interest, self-review and familiarity threat if the member was a director, officer or an employee with significant influence.

Answer 102

* The position of the individual held with the client * The involvement of the individual in the audit team * The length of time since being a member of the team * The former position of the individual within the team or firm.

Answer 103

* Modifying the audit plan * Having an appropriate reviewer to check the former team’s work * Assigning to the audit team to individuals who have sufficient experience relative to the individual who joined the client

Answer 104

The loan of personnel to an audit client creates a self-review, advocacy or familiarity threat.

Answer 105

* It may be acceptable if the secondment is only for a short time or, * If the staff member is not involved in management or non-assurance activities * In certain secondments, the firm becomes too closely linked to the audit client – in which case it should not take place.

Answer 106

* Conducting an additional review of the work performed by the loaned person to address a self-review threat. * Not including the loaned personnel as an audit team member to address a familiarity or advocacy threat.

Answer 107

Familiarity and self-interest threats for objectivity will be created if person is on audit for a long period of time.

Answer 108

* The length of time that the individual has been on the team * The role of the individual on the team * The extent work is directed, reviewed and supervised by senior personnel * ability to influence outcome of audit * closeness of relationship * nature, frequency and extent of interaction * Whether the nature and complexity of the client’s accounting and reporting issues have changed * Whether the client’s management team has changed * structural changes in client’s organisation impacting nature, frequency and extent of interaction

Answer 109

* Changing role of individual on audit team or nature and extent of tasks * Rotate senior staff off the engagement team * Appropriate reviewer * Regular independent internal or external quality reviews

Answer 110

* Creates a self-review, self-interest and advocacy threat for objectivity and independence. * Remember if it is so significant that safeguards cannot reduce the threat, the engagement must be rejected.

Answer 111

* Type of client (audit client, public interest etc.) * Type of non-assurance services to be provided (e.g. tax services) * Who provides the non-assurance service * The extent to which the non-assurance service impacts the financial statements and internal controls * The level of expertise of the client’s employees with respect to the service provided

Answer 112

* The person performing the services may not be on the audit team * Procedures and policies prohibit participation in management decisions * Source documents must be prepared by client * Audit committee must approve appointment members of the team * A senior staff member with experience and who is not on the audit team must review the work of that person.

ethics (term 3) Flashcards

(137 cards)