Ethics and Acceptance

Frage	Antworten
List the 5 fundamental principles	- Objectivity - professional behaviour - professional competence and due care - integrity - confidentiality
Which of the five fundamental principles is.. members should comply with relevant laws and regulations and avoid any action that discredits the profession	professional behaviour
Which of the five fundamental principles is.. members should be straightforward and honest in all professional and business relationships	integrity
Which of the five fundamental principles is.. members should not allow bias, conflicts of interest to override professional or business judgements	objectivity
Which of the five fundamental principles is.. members should maintain professional knowledge and skill at a level to ensure a client/ employer receives competent professional services based on current developments in practice, legislation and techniques	Professional competence and due care
Which of the five fundamental principles is.. members should respect confidentiality of information acquired as a result of professional and business relationships	Confidentiality
List the 5 threats to the fundamental principles	- self review - advocacy - intimidation - self interests - familiarity
Explain familiarity	being to sympathetic or trusting of a client due to a long/ close relationship
Explain self interest	a financial or other interest that will inappropriately influence the judgement or behaviour of the assurance provider
Explain advocacy	promoting the position of the client
Explain intimidation	actual or perceived pressures from the client
What is an action/ measure that eliminates a threat or reduces a threat to a reduced acceptable level	safeguard
Safeguards are divided into two broad categories what are they	- Safeguards created by the profession, legislation or regulation - Safeguards created by the work environment
List three circumstances when the auditor has a duty to disclose information to a specific authority?	- breaches specific laws - if a court order is obtained - if it is required by a professional body
List three circumstances where an auditor has the RIGHT to disclose information?	- if the client gives their permission - to protect a member or a firms interests i.e in court - if it is in the pulic interest
List some things the audit team must do to reduce the risk of conflicts of interest	- advise clients to seek independent advice - separate engagement teams - sign confidential agreements
Auditors should only accept a new audit engagement or continue an existing one if the preconditions reuired by ISA 210 are met, which require:	- the appropriate financial reporting framework to be applied - obtain agreement of management that it acknowledges and understands its responsibilities
An engagement letter is	sent before the audit specifying the nature of the contract between the audit firm and the client. Minimising the risk of any misunderstanding
How often should the engagement letter be reviewed?	Every year
State three reasons why the engagement letter may need to be changed?	- changes to statutory duties due to new legislation - change to professional duties, due to new ISAs - change to 'other services' as requested by client
What is the contents of an engagement letter (5)	- the objective and scope of audit - the responsibilities of the auditor - the responsibilities of the management - the identification of an applicable financial reporting framework - reference to the expected form and content of any reports to be issued
Role of audit committee	- improve quality of financial reporting - create climate of discipline and control - enable NEDs to contribute to independent judgement - Help FD by providing a forum in which he can raise issues concerned - provide a channel of communication for external auditor - increase public confidence in FS - Strengthen independence of internal audit - Allow external auditor to assert independence in the event of a dispute with management
Before an auditor accepts appointment they must ensure:	- they are independent - are competent - have sufficient resources - obtain references - make a risk assessment - communicate with present auditor
What is the maximum % of a firms income can come from one client before it is considered a self interest threat	15%
What are outstanding fees perceived to be	a loan to the client which is strictly prohibited
Audit partners should be swapped every how many years and the reason why	every 5 years because the partners independence is threatened with familiarity
What are the corporate governance requirements for a listed company	- Ensuring that the chairman and the CEO are different people. – Appointing NEDs to the board . The number of NEDs should be the same as the number of executive directors less the chairman. – Ensuring that at least one NED has relevant financial experience. – Appointing the NEDs to the audit committee, remuneration committee and possibly an appointments committee. The chairman will also have a seat on these committees. – Establishing an internal audit department to review internal control systems and make reports to the audit committee. – Ensure that an appropriate system of internal control and the directors recognise their responsibilities for establishing and maintaining this system. – Establishing procedures to maintain contact with institutional shareholders and any other major shareholders. – Checking that the annual financial report contains information on corporate governance required by the stock exchange (e.g. a report on how directors monitor the internal control systems).

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