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AAT > Level 3 Ethics > Flashcards

Level 3 Ethics Flashcards

1
Q

Why behave ethically?

A

~ law and regulation
~ reputation and standing
~ protection of the public interest

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2
Q

What are the 5 fundamental ethical principles

A 
Integrity
Objectivity
Professional competence and due care
Confidentiality
Professional behaviour
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3
Q

What is integrity?

A

Straightforward, honest, implies fair dealing and truthfulness

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4
Q

What Is objectivity?

A

Uncompromised by bias, conflict of interest or the undue influence of others

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5
Q

What is professional competence and due care?

A

Maintain professional knowledge and skill and act diligently

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6
Q

What is confidentiality?

A

Refrain from disclosure of confidential information, and from using such information for personal (or third party) advantage.

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7
Q

What is professional behaviour?

A

Comply with relevant laws and regulations, and avoid any action that may bring the profession into disrepute.

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8
Q

What is the basic problem solving procedure set by the accountant’s code of professional ethics?

A

Identify the threat to a fundamental principle

  • > evaluate the threat
  • > apply safeguards
  • > if safeguards cannot be applied, discontinue the action or service.
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9
Q

What are the threats to our fundamental principles?

A 
Self-interest
Self-review 
Advocacy 
Familiarity
Intimidation
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10
Q

What are the two types of safeguards?

A

1) safeguards created by the profession, legislation or regulation
2) safeguards in the work environment (eg quality control)

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11
Q

What are the advantages to the ‘principles’ approach

A 
~ Rigorous (comply with the spirit)
~ 'Bigger picture'
~ Flexible for changing circumstances
~ Promotes development of skills and judgement
~ Creates a culture of ethical awareness
~ Encourages personal responsibility
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12
Q

What are the advantages to the ‘rules’ approach?

A

~ Clear cut
~ Correct course of action will be more obvious
~ Easier to enforce

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13
Q

What are the disadvantages to the ‘principles’ approach?

A

~ Not easy to find the right answer
~ May be more than one course of action
~ Conflicting interests need to be balanced

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14
Q

What are the disadvantages to the ‘rules’ approach?

A

~ Loopholes can be found
~ ‘Tick box’ mentality promoted
~ Have to legislate for every eventuality
~ New requirements must be developed
~ Too detailed - miss the ‘bigger picture’

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15
Q

Who are the UKs accounting regulators?

A

FRC - the financial reporting council

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16
Q

Who are the international accounting regulators?

A

IESBA - international ethics standards board for accountants

IFAC - international federation of accountants

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17
Q

What are some safeguards created by the profession and/or legislation and regulation?

A
  • Relevant education and training as a standard entry requirement to the professional body
  • compulsory CPD to update professional knowledge
  • corporate governance (adopt internal controls and national/international financial reporting)
  • professional standards (monitoring and application of disciplinary procedures to report unethical behaviour)
  • external review of financial reports by auditors.
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18
Q

What are some safeguards created in the work environment?

A
  • quality controls, internal audits
  • mechanisms to protect “whistle blowers”
  • consult independent third parties
  • allow job rotation
  • share and discuss ethical dilemmas with experts
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19
Q

What are the rules for handling clients money?

A

Clients funds must be separate and identifiable from the accountants monies; used exclusively for the intended purpose; accountants accountability (any mishandling could result in theft and/or abuse of position)

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20
Q

What is operational risk?

A

Risk of loss or damage to routine business activities resulting from inadequate or failed internal processes, people and systems or from external events.

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21
Q

What is event risk?

A

Operational risk of of loss due to single events that are unlikely but may have serious consequences

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22
Q

Operational risk classifications are:

A 
Reputational
Litigation
Process
People
Systems
Legal
Event
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23
Q

What 3 services can only be provided by licensed/authorised accountants?

A

External audit
Investment
Insolvency

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24
Q

Money laundering legislations:

A

Money laundering regulations 2007
Terrorism act 2000 (ta)
Proceeds of crime act 2002 (POCA)

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25
Q

Money laundering: penalties

A

Up to 14 years imprisonmanet and/or unlimited fines

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26
Q

Money laundering: who do you disclose to ?

A

MLRO or SOCA

27
Q

Money laundering: if you don’t disclose….

A

Subject to 5 years imprisonment and/or unlimited fines

28
Q

Bribery act 2010

A

Gifts/hospitality/inducements leading to corruption; up to 10 years imprisonment and unlimited fines

29
Q

Name some objectives of the accountancy profession

A

~ the mastering of particular skills and techniques
~ development of an ethical approach to work
~ acknowledgment of duties to society
~ objective outlook
~ rendering services to the highest standards
~ achieving acceptance by the public

30
Q

What professional bodies sponsor the AAT

A
  • ICAEW institute of chartered accountants in England and Wales
  • ICAS institute of chartered accountants of Scotland
  • CIPFA chartered institute of public finance and accountancy
  • CIMA the chartered institute of management accountants
31
Q

Which professional bodies are members of ccab?

A
  • CAI chartered accountants of Ireland
  • ACCA association of chartered certified accountants
  • ICAEW institute of chartered accountants in England and Wales
  • ICAS institute of chartered accountants of Scotland
  • CIPFA chartered institute of public finance and accountancy
32
Q

What are the 3 committees of the FRC?

A
  • codes & standards committee
  • executive committee
  • conduct committee
33
Q

What are the 2 categories of UK law?

A

Criminal law

Civil law

34
Q

Criminal law…

A

Affects the whole community.

Punishable by fines or imprisonment

35
Q

Civil law…

A

Relates to conflicts within the community.

The concept of punishment does not apply

36
Q

What is the CCAB?

A

The consultative committee of accountancy bodies

The CCAB co-ordinates and unites the accountancy profession in the UK and Ireland

37
Q

What is the HMRC?

A

A government department whose aim is to ensure that the correct tax is paid at the right time

38
Q

What is the NCA?

A

The national crime agency (NCA) is a UK body whose aim is to tackle serious organised crime such as Class A drugs, human trafficking, fraud and money laundering

39
Q

What are the advantages of effective ethical programmes?

A
  • improve communication of expected standard of behaviour
  • promote consistency of conduct
  • help to reduce risk and damage to corporate reputation
40
Q

What is sustainability

A

Meet the needs of the present without compromising the ability of future generations to meet their own needs (UN Brundtland report)

41
Q

What is Corporate Social Responsibility (CSR)?

A

The obligations that a business feels it has to its local community, persons and organisations connected to it and to the society as a whole.

42
Q

What is the ‘triple bottom line’? (sustainability)

A
  • Financial (supporting organisational profitability, clients, local businesses, paying suppliers)
  • Social (supporting labour, the community and the region the business operates)
  • Environmental (use less energy, create less pollution, support policies to manage resources)
43
Q

What are the responsibilities of finance professionals?

A
  • creating and promoting ethical culture
  • championing the aims of sustainability
  • evaluating and quantifying reputation all and other ethical risks
  • taking social, environmental and ethical factors into account when making decisions
  • promoting sustainable practices
  • raising awareness of social responsibility
44
Q

What are the types of operational risk? (Won’t need to know all of these)

A
  • Internal fraud
  • External fraud
  • Employment practices and workplace safety
  • Clients, products and business practice
  • Damage to physical assets
  • Business disruption and system failures
  • Processes and delivery outputs
45
Q

Name some sources of event risk

A

Physical
Social
Political
Economic

46
Q

What is Continuing professional development (CPD)

A

CPD develops and maintains the capabilities that enable a member to perform competently within the professional environment

47
Q

Key areas to keep up to date (CPD)

A 
Reporting and auditing standards 
Ethical codes
Tax and company legislation
Criminal law affecting accountants 
Other regulations affecting accountancy
48
Q

During your dealings with clients, suppliers, colleagues and others you should act with

A

Integrity, honesty, fairness and sensitivity

49
Q

Self interest threats to members in practice could be…

A
  • Having a financial interest in client
  • Depending upon a client’s fees for a significant portion of income
  • Having a close personal relationship with client
  • Having concerns about losing a client or protential employment with one
  • Contingent fees
50
Q

Self interest threats to members in business could be…

A
  • Having financial interest in the employer
  • Financial incentives based on profits
  • Opportunity to use corporate assets to own advantage
  • Threats to job security or promotion prospects
  • Commercial pressure to help firm complete in order to keep job
51
Q

Self review threats to members in practice could be…

A
  • Discovery of a significant error when re-evaluating own work
  • reporting on systems after being involved in designing them
  • preparing the data used in reports you are required to check
52
Q

Self review threats to members in business could be…

A

Being asked to review data or justify/evaluate decisions that you have been involved in

53
Q

Familiarity threats to members in practice could be…

A
  • Having a close or personal relationship with a senior employee of a client
  • a former partner of the firm now in a senior position of the client firm
  • accepting significant gifts or preferential treatment from a client
  • long association of senior personnel with the client
54
Q

Familiarity threats to members in business could be…

A
  • Having a close or personal relationship with someone who may benefit from your influence
  • long association with a business contact which may influence your decisions
  • acceptance of a significant gift or preferential treatment
55
Q

Intimidation threats to members in practice could be…

A
  • threat of dismissal, replacement, or litigation in respect of an engagement
  • pressure to reduce quality of work to keep fees down
56
Q

Intimidation threats to members in business could be…

A
  • threats of dismissal or replacement over a disagreement

- a dominant individual attempting to influence your decisions

57
Q

Advocacy threats to a member in practice could be…

A

Acting on behalf of an audit client which is in a dispute with a third party

58
Q

Advocacy threats to members in business could be…

A

There are unlikely to be a significant advocacy threat to employees of an organisation, since they are expected to promote the employer’s position to further its objectives.

59
Q

Before accepting a new appointment you must consider…

A
  • whether you have the expertise and competence
  • whether you have the resources (staff and time)
  • whether you are objective
  • whether there is a threat to confidentiality
60
Q

Conflict of interest

A

The interests of one client should not have a negative effect on the interests of another client
Eg 2 client companies in are direct competition - and adverse disclosures about one would benefit the other.

61
Q

In the event of a conflict of interest you should…

A
  • put safeguards in place to avoid the negative effects
  • avoid new appointments that might negatively affect existing clients
  • disclose enough information to both parties, so that they can made a decision
62
Q

Conflicts of interest in large firms…

A

In large firms it is possible to build “Chinese walls”, using separate staff teams for different clients.

63
Q

Second opinions… Safeguards to apply:

A
  • seek clients permission to contact existing accountant
  • describe any limitations surrounding any opinion in client communications
  • provide existing accountant wait ha copy of the opinions
  • discontinue if client does not provide permission to contact existing firm

AAT (1 decks)

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