PROFESSIONAL ETHICS
CHAPTER OBJECTIVE
1. FUNDAMENTAL PRINCIPLES
2. CONFLICT OF INTEREST
3. THREATS TO OBJECTIVITY AND INDEPENDENCE
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1. FUNDAMENTAL PRINCIPLES
The ACCA Code of Ethics and Conduct are detailed below:
a. Integrity: straightforward and honest
b. Objectivity and independence: fair, not allow prejudice or bias or the influence of others to override objectivity
c. Professional competence and due care: refrain from undertaking or continuing any assignments which they are not competent to carry out, proper degree of care, maintain professional knowledge and skill and up-to-date developments.
d. Confidentiality: confidentiality of information, but exceptions with proper and specific authority, legal duty to disclose or public duty to disclose.
e. Professional behaviour: behave with courtesy and consideration.
2. CONFLICT OF INTEREST
This arises when an auditor either audits two competing companies or is asked to become auditor of a company whilst at the same time auditing a competitor. There is a risk that sensitive commercial data could be passed from one company to the other via the audit team.
If the auditor can implement appropriate safeguards, such as using separate audit teams and having clear instructions, then it is possible for the auditor to proceed with both engagements. However, both clients must be informed of the situation in writing and if the oppose the arrangement the auditor should decline at least one of the engagements.
3. THREATS TO OBJECTIVITY AND INDEPENDENCE
1. Self-interest threat
Auditor earns some form of beneficial interest from the audit client.
By direct or indirect financial interest- for example, holding shares in the client.
By loans to or from the client or any officer, director or principal shareholders of a client company.
By holding a financial interest in a joint venture with a client or employees (s) of a client
By accepting gifts and hospitality
Fees should not exceed 10% of the audit firm’s annual fee income (15% for a non-listed business).
2. Self-review threat
When auditors perform tasks similar to those already performed for the same client or when the auditor reviews work already performed for the same client.
3. Advocacy threat
It is important that auditors do not act as a representative for a client. For example, auditors should not be used to give references to banks or potential investors if they were to start offering guarantees of financial stability it would be embarrassing ( and potentially costly in terms of lawsuits) in the following year if, when auditing that same client, they discovered that the accounts were misstated and the client was actually in financial difficulty.
4. Familiarity threat
Personal and family relationships can affect independence. Could someone be truly independent in carrying out an audit if their husband/wife was a director of the client ?
5. Intimidation
This occurs when the client tries to coerce the auditor into offering an opinion that they would not ordinarily have arrived at through normal audit procedures. This could be in the form of physical or verbal intimidation or it could come in the form of withholding fees or even bribery.
Source:
- Kaplan, FAU
- Phnom Penh HR (www.pp-hr.com)