Allows for the variations that are found in every individual situation
Can accommodate a rapidly changing environment
Threats to compliance with the fundamental principles
Self - Interest
Self-Review
Advocacy
Familiarity
Intimidation
SAFEGUARDS
Firm-Wide Safeguards
Leadership that stresses the importance of compliance.
Policies & procedures to enable identification of interests.
Policies & procedures manage the reliance on revenue received from a single client.
Policies & procedures to encourage & empower staff to communicate any
issue re compliance.
Engagement-specific
Review the work performed by an accountant not involved in the audit
Consulting an independent third party
Discussion with those charged with governance
Rotating senior assurance team personnel
Independence
1) Identify threats
2) Evaluate the significance
3) Apply Safeguards to eliminate the threat or reduce to an acceptable level
Where none available, eliminate the interest or decline the engagement.
CURRENT ISSUES:- EC proposals to ban non audit work for auditors of larger companies, along with
mandatory rotation
2012: FTSE 350 co in the UK to put the external audit out to tender at least every 10 years.
A provider of ASSURANCE services must be, and be seen to be, independent.
ISA 200 :- Maintaining professional skepticism is necessary to reduce the risks of:-
Overlooking unusual circumstances
Over generalising when drawing
concultions from observations
Using inappropriate assumptions in determining the nature,
timing, extent of the audit and evaluating the threats.
Public Interest Entities
Any listed entity
Defined by regulation or legislation
Required by legislation to have an audit as
independent as if it was a listed entity
Allows the CODE to prescribe stricter
requirements for the public interest
entities.
Confidentiality
Duty of confidence
Do not disclose information without PROPER AUTHORITY
Do not use information for PERSONAL ADVANTAGE
Information may be disclosed if there is a RIGHT or DUTY to do so.
Client must agree to disclose in FULL ALL information
relevant to the engagement
Duty continues even AFTER THE END OF THE
RELATIONSHIP with the client.
Exceptions to the rule
Permitted by law and AUTHORISED BY THE CLIENT
Required by law
Professional duty or right
Disclosure may be OBLIGATORY or VOLUNTARY
OBLIGATORY
Believe that a client has
committed terrorist offences
Believe that a client has
committed treason
VOLUNTARY
Public Interest
The police, government department for trade
and industry, recognised stock exchange
CHECKLIST
1) Size of the amounts involved & likely financial damage
2) Members of the public are likely to be affected
3) Possibility or likelihood of repetition
4) Reasons why client is unwilling to disclose to the proper authority
5) Gravity of the matter
6) Any legal advice obtained
Protect a professional accountants's interests
Defend themselves against a criminal charge or
suspicion
Resist proceedings in relation to a taxation offence
Resist legal action by a client
Defend themselves against disciplinary proceedings
Enable them to sue for their fees.
Authorised by statute
Anti-money laundering legislation
Whistleblowing responsibilities
Conflicts of interest
Between members & 'clients'
Members and firms should not accept or continue engagements in which there are or
are likely to be, significant conflicts of interest between members, firms and clients.
Unless they are clearly insignificant, they should apply safeguards
Between interests of different clients
Clients who are in competition, ensure that it is not the
subject of a dispute between the clients.
Where acceptance or continuance of an engagement
would, even with safeguards, materially prejudice the
interests of any client, the appointmnet should not be
accepted or continued.
Between clients interests
Relationships that ended 2 or more years earlier are unlikely to create a conflict