Ethics Lecture#2

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AUDITING ETHICS Lecture # 2 Fundamental Principles Integrity The principle of integrity imposes an obligation on all professional accountants to be straightforward and honest in professional and business relationships. Integrity also implies fair dealing and truthfulness. Objectivity The principle of objectivity imposes an obligation on all professional accountants not to compromise their professional or business judgment because of bias, conflict of interest or the undue influence of others. Professional Competence and Due Care The principle of professional competence and due care imposes the following obligations on professional accountants: To maintain professional knowledge and skill at the level required to ensure that clients or employers receive competent professional service; and To act diligently in accordance with applicable technical and professional standards when providing professional services Confidentiality The principle of confidentiality imposes an obligation on professional accountants to refrain from: Disclosing outside the firm or employing organization confidential information acquired as a result of professional and business relationships without proper and specific authority or unless there is a legal or professional right or duty to disclose; and Using confidential information acquired as a result of professional and business relationships to their personal advantage or the advantage of third parties. Md. Mokhlesur Rahman Mozid, ACMA

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Transcript of Ethics Lecture#2

AUDITINGETHICSLecture # 2Fundamental PrinciplesIntegritThe principle of integrity imposes an obligation on all professional accountants to bestraig!t"#r$ard and !#nest in pr#"essi#naland business relationships. Integrity also implies"air dealing and trut!"ulness.%&'ecti(itThe principle of objectivity imposes an obligation on all professional accountants not tocompromise theirpr#"essi#nal #r &usiness 'udgmentbecause of&ias) c#n"lict #" interest #rt!e undue in"luence #" #t!ers.Pr#"essi#nal C#mpetence and Due CareTheprincipleofprofessional competenceandduecareimposesthefollowingobligationsonprofessional accountants: To maintain professional knowledge and skill at the level required to ensure that clients oremployers receive competent professional service; and To act diligently in accordance with applicable technical and professional standards whenproviding professional servicesC#n"identialitTheprincipleofconfidentialityimposesanobligationonprofessional accountantstorefrainfrom: Disclosing outside the firm or employing organization confidential information acquired as aresult ofprofessional andbusinessrelationshipswithout properandspecificauthorityorunless there is a legal or professional right or duty to disclose; and Using confidential information acquired as a result of professional and businessrelationships to their personal advantage or the advantage of third parties. T!e "#ll#$ing are circumstances $!ere pr#"essi#nal acc#untants are #r ma &e re*uired t#discl#se c#n"idential in"#rmati#n #r $!en suc! discl#sure ma &e appr#priate+ Disclosure is permitted by law and is authorized by the client or the employer;Disclosure is required by law, for eample!i. "roduction of documents or other provision of evidence in the course of legalproceedings; orii. Disclosure to the appropriate public authorities of infringements of the law that cometo light; andMd. Mokhlesur Rahman Mozid, ACMA There is a professional duty or right to disclose, when not prohibited by law!i. To comply with the quality review of a member body or professional body;ii. To respond to an inquiry or investigation by a member body or regulatory body;iii. To protect the professional interests of a professional accountant in legal proceedings;oriv. To comply with technical standards and ethics requirements.Pr#"essi#nal ,e!a(i#rTheprincipleofprofessional behavior imposesanobligationonprofessional accountants toc#mpl $it! rele(ant la$s and regulati#ns and a(#id an acti#n t!at ma &ring discredit t#t!epr#"essi#n. This includes actions whichareasonableandinformedthirdparty, havingknowledge of all relevant information, would conclude negatively affects the good reputation ofthe profession.T!reats and Sa"eguards1. Eamples of circumstances that may create sel"-interest threats for a professional accountantin public practice include, but are not limited to:# $ financial interest% in a client or &ointly holding a financial interest with a client.# Undue dependence on total fees from a client# 'aving a close business relationship with a client# (oncern about the possibility of losing a client# "otential employment with a client# Contingent fees% relating to an assurance engagement.# $ loan to or from an assurance client or any of its directors or officers!. Eamples of circumstances that may create sel"-re(ie$ threats include, but are not limited to:# The discovery of a significant error during a re)evaluation of the work of the professionalaccountant in public practice#*eportingontheoperationoffinancial systemsafterbeinginvolvedintheirdesignorimplementation# 'aving prepared the original data used to generate records that are the sub&ect matter ofthe engagement# $ member of the assurance teambeing, or having recently been, a director or officer% ofthat client# $ member of the assurance team being, or having recently been, employed by the client in aposition to eert direct and significant influence over the sub&ect matter of the engagement# "erforming a service for a client that directly affects the sub&ect matter of the assuranceengagementMd. Mokhlesur Rahman Mozid, ACMA". Eamples of circumstances that may create ad(#cac threats include, but are not limited to:# "romoting shares in a listed entity% when that entity is a financial statement audit client# $cting as an advocate on behalf of an assurance client in litigation or disputes with thirdparties#. Eamples of circumstances that may create "amiliarit t!reatsinclude, but are not limitedto:# $ member of the engagement team having a close or immediate family relationship with adirector or officer of the client# $ member of the engagement team having a close or immediate family relationship with anemployee of the client who is in a position to eert direct and significant influence over thesub&ect matter of the engagement# $ former partner of the firm being a director or officer of the client or an employee in aposition to eert direct and significant influence over the sub&ect matter of the engagement# $ccepting gifts or preferential treatment froma client, unless the value is clearlyinsignificant# +ong association of senior personnel with the assurance client$. Eamples of circumstances that may create intimidati#n threats include, but are not limitedto:# ,eing threatened with dismissal or replacement in relation to a client engagement.# ,eing threatened with litigation.# ,eing pressured to reduce inappropriately the etent of work performed in order to reducefees.Sa"eguards./ Sa"eguardsthat mayeliminateorreducesuchthreatstoanacceptablelevel fall intotwobroad categories: -afeguards created by the profession, legislation or regulation; and -afeguards in the work environment.2/ Sa"eguards created & t!e pr#"essi#n, legislation or regulation include, but are not restrictedto: .ducational, training and eperience requirements for entry into the profession (ontinuing professional development requirements (orporate governance regulations "rofessional standards"rofessional or regulatory monitoring and disciplinary proceduresMd. Mokhlesur Rahman Mozid, ACMA