Accountant
RELEVANT TO ACCA QUALIFICATION PAPER P7
A question of ethics
Paper P7, Advanced Audit and Assurance often contains question scenarios and requirements dealing with ethical issues, in both the compulsory and optional questions. When ethics appears in an optional question, it seems to be a popular choice for candidates in the exam, but answers are often lacking in detail and not well applied to the question scenario. The purpose of this article is to assist candidates in terms of knowledge and question technique when tackling a question on ethics. The IESBA Code IESBA’s (IFAC’s) Code of Ethics for Professional Accountants provides a conceptual framework that requires a professional accountant to identify, evaluate, and address threats to compliance with the fundamental principles. The conceptual framework approach should assist professional accountants to comply with the ethical requirements of the IESBA Code, and to serve the public interest. Guidance is provided in several areas: the identification of threats; the evaluation of the significance of those threats; and the use of safeguards that may serve to reduce threats to an acceptable level. In addition there are circumstances in which safeguards cannot reduce a threat to an acceptable level, and guidance is given on this also. Each of these points is discussed below. Threats to compliance with the fundamental principles The IESBA Code states that threats may be created by a broad range of relationships and circumstances. A circumstance or relationship may create more than one threat, and a threat may affect compliance with more than one fundamental principle. The threats to compliance are listed and described as follows in the IESBA Code: • Self-interest threat – the threat that a financial or other interest will inappropriately influence the professional accountant’s judgment or behaviour. • Self-review threat – the threat that a professional accountant will not appropriately evaluate the results of a
A question of ethics
Paper P7, Advanced Audit and Assurance often contains question scenarios and requirements dealing with ethical issues, in both the compulsory and optional questions. When ethics appears in an optional question, it seems to be a popular choice for candidates in the exam, but answers are often lacking in detail and not well applied to the question scenario. The purpose of this article is to assist candidates in terms of knowledge and question technique when tackling a question on ethics. The IESBA Code IESBA’s (IFAC’s) Code of Ethics for Professional Accountants provides a conceptual framework that requires a professional accountant to identify, evaluate, and address threats to compliance with the fundamental principles. The conceptual framework approach should assist professional accountants to comply with the ethical requirements of the IESBA Code, and to serve the public interest. Guidance is provided in several areas: the identification of threats; the evaluation of the significance of those threats; and the use of safeguards that may serve to reduce threats to an acceptable level. In addition there are circumstances in which safeguards cannot reduce a threat to an acceptable level, and guidance is given on this also. Each of these points is discussed below. Threats to compliance with the fundamental principles The IESBA Code states that threats may be created by a broad range of relationships and circumstances. A circumstance or relationship may create more than one threat, and a threat may affect compliance with more than one fundamental principle. The threats to compliance are listed and described as follows in the IESBA Code: • Self-interest threat – the threat that a financial or other interest will inappropriately influence the professional accountant’s judgment or behaviour. • Self-review threat – the threat that a professional accountant will not appropriately evaluate the results of a