• 20 Marks

AA – May 2017 – L2 – SA – Q3 – Professional Ethics and Code of Conduct for Auditors

Identification of threats to ethical principles and safeguards for accountants.

There are a variety of circumstances that could give rise to the threats of self-interest, advocacy, familiarity, and intimidation against the five fundamental principles of integrity, objectivity, personal competence and due care, confidentiality, and professional behaviour as enunciated in the Code of Ethics. There are, however, safeguards created to help the Professional Accountant in such circumstances.

You are required to:

  1. (a) List FIVE safeguards created by the profession and legislation. (5 Marks)
  2. (b) Identify and explain FIVE safeguards that could be created by firms of Chartered Accountants. (10 Marks)
  3. (c) List FIVE possible safeguards that an individual Chartered Accountant could apply. (5 Marks)

(a) Safeguards Created by Profession and Legislation

  1. Educational, training, and experience requirements for entry into the profession.
  2. Continuing professional development requirements.
  3. Corporate governance regulations.
  4. Professional standards (such as ISAs/NSAs).
  5. Regulatory monitoring and disciplinary procedures (e.g., ICAN’s disciplinary actions).

(b) Safeguards Created by Firms of Chartered Accountants

  1. The firm’s systems of ethics and induction programs, such as internal training or mentoring.
  2. Recruitment procedures ensuring high-caliber staff.
  3. Disciplinary processes for handling infractions and non-compliance.
  4. Strong internal control policies within the firm.
  5. Policies and procedures to implement and monitor the quality of employee performance.

(c) Safeguards Created by Individual Chartered Accountants

  1. Adherence to continuing professional development requirements.
  2. Maintaining records of contentious issues and decision-making approaches.
  3. Developing an understanding of other organizations to provide broader perspectives.
  4. Keeping contact with legal advisors and professional bodies.
  5. Acquiring professional indemnity insurance.
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