(Tiểu luận) mid term reportethical consideration

FOREIGN TRADE UNIVERSITY FACULTY OF ACCOUNTING AND AUDITING *** MID-TERM REPORT ETHICAL CONSIDERATION Ethical Considera琀椀on Group 14 FOREIGN TRADE UNIVERSITY FACULTY OF ACCOUNTING AND AUDITING *** MID-TERM REPORT ETHICAL CONSIDERATION Numerical order Student Code Full name 14 2112820017 Nguyễn Thị Linh Chi 29 2112820029 Vũ Nguyệt Hà 44 2111820044 Lê Trần Long 59 2112820061 Đào Xuân Phúc 74 2114820016 Nguyễn Tiến Trung Presentation Group : Class : KET.F1.1(GD1-HK1-2223).1 Instructor : Pham Thi Ngoc Thu Ethical Considera琀椀on Group 14 Hanoi, October 2022 INTRO Business ethics are crucial in many areas, but they're particularly crucial when it comes to the company's accounting records Even though you might not be an accountant, accountants are required to handle books with the same professionalism Even though certain unethical accounting techniques could seem like a fantastic idea, an organization will eventually suffer as a result If they act unethically or don’t practice good accounting ethics, their business could lose customers or even either have trouble retaining employees or struggle to stay afloat.In addition to the aforementioned effects, if theey practice unethical accounting, their customers, employees, and investors may lose faith in the company and brand Additionally, being dishonest in accounting could be the end of a startup and force the owner to permanently close his doors Therefore, accountants must adhere to accounting ethics whether they are a bookkeeper for their own firm or a CPA (certified public accountant) Ethical Considera琀椀on Group 14 Table of contents: Contents I ACCOUNTANTS AND ETHICS Key reasons for accountants to behave ethically Approaches to accountancy ethics .7 II A CODE OF ETHICS FOR ACCOUNTANTS IFAC and the ACCA Fundamental principles of the ACCA Code of Ethics and Conduct Personal qualities expected of an accountant .8 Professional qualities expected of an accountant .9 Conflict of interest .9 Self-interest threat 10 6.1 Financial interest .10 6.2 Close business relationships .11 6.3 Employment with client 11 6.4 Partner on client board 12 6.5 Family and personal relationships .12 6.6 Gifts and hospitality 13 6.7 Loans and guarantees 14 6.8 Overdue fees .14 6.9 Percentage or contingent fees 15 6.10 High percentage of fees 15 6.11 Lowballing 16 6.12 Recruitment 16 Self-review threats 17 *What Are Some Safeguards Against The Self-Review Threat? 19 7.1 Recent service with an assurance client 20 7.2 General services 20 7.3 Preparing accounting records and financial statements .21 7.4 Valuation services .21 7.5 Taxation services 22 7.6 Internal audit services .22 Ethical Considera琀椀on Group 14 7.7 Corporate finance 22 7.8 Other services 23 Advocacy threat .23 Family threat 24 10 Intimidation threat 24 III Case study 25 Fundamental Principles 25 Danger of compromising fundamental ethical principles 27 2.3 Other services that can be offered together 29 2.4 Identify Threats .31 Reference 34 Ethical Considera琀椀on Group 14 I ACCOUNTANTS AND ETHICS As an accountant, your values and attitudes flow through everything you professionally They contribute to the trust the wider community puts in the profession and the perception it has of it They say not to judge a book by its cover, but bad ethics come with a bad reputation for both the accounting company, and their clients For accountants, this can result in loss of clients, or difficulty retaining clients and gaining new clients which, in turn, will have a negative impact on revenue For clients, the association with the bad ethics of their accountant (even if they have left), may have an impact on their reputation Some may make the assumption that they intentionally sought out bad ethics or illegal practices Key reasons for accountants to behave ethically 1.1 Law and regulation Ethical issues may be a matter of law and regulation All accountants should commit to professional behavior by complying with the laws and regulations of their profession Commitment to professional behavior ensures that the accountant doesn’t discredit or negatively affect the profession 1.2 Reputation Protecting the profession's reputation and standing Given the nature of the business, and in compliance with various laws, accounting information needs to be kept confidential Clients trust accountants with sensitive information, therefore ethics need to be strongly adhered to in order to protect its confidentiality Document continues below Discover more from: ACCA Orientation Trường Đại học… 95 documents Go to course 12 F6vnm 2017 dec q practice questions ACCA Orientation 100% (2) ACCA 2022 516 13 Workbook (02) ACCA Orientation 100% (2) 1652158032173691 FM Mock test ACCA Orientation 100% (2) Oxford - Solutions 34 380 Intermediate… ACCA Orientation 73% (37) F4 - Global Study text 2020 ACCA Orientation Ethical Considera琀椀on 1.3 Public interest 100% (1) Group 14 2020 ffr study guide - ifrs9 ACCA None The public interest is an important, though abstract notion associated Orientation with the public benefit, rather than matters in which the public is interested The accountancy profession’s actions to further the public interest include: developing technical and behavioral standards; establishing an infrastructure of training, development, monitoring and enforcement to help ensure those standards are applied; and promoting programmes to advance thinking and develop guidance to further the profession’s contribution to business and society Approaches to accountancy ethics Professionals will have their own idea of what behavior is ethical and what is not Despite the differences, there are common views and values that shine through To help individuals judge whether or not they are acting ethically in particular circumstances, guidance should be given that unify the ideas Such guidance is usually known as a 'Code of ethics' or 'Code of conduct' II A CODE OF ETHICS FOR ACCOUNTANTS IFAC and the ACCA ACCA (the Association of Chartered Certified Accountants) is a global body for professional accountants with 219,000 members and 517,000 students in 179 countries It was granted a Royal Charter in 1974 which commits it to acting in and upholding the public interest To enable the development of high standards, IFAC's ethics committee established a code of ethics The code indicates a minimum level of conduct that all accountants must adhere to As a member of IFAC, ACCA released its Ethical Considera琀椀on Group 14 own code of ethics, designed to align to the IFAC code The IFAC code is now administered by the International Ethics Standards Board for Accountants (IESBA) Fundamental principles of the ACCA Code of Ethics and Conduct ACCA members agree to be bound by the ACCA's Code of Ethics and Conduct and comply with the following fundamental principles:  Integrity  Confidentiality  Objectivity  Professional behavior  Professional competence and due care The fundamental principles within the Code – integrity, objectivity, professional competence and due care, confidentiality and professional behavior – establish the standard of behavior expected of a professional accountant (PA) and it reflects the profession’s recognition of its public interest responsibility Those fundamental principles as well as the categories of threats to them – self-review, selfinterest, advocacy, familiarity and intimidation threats are unchanged Also unchanged, are the overarching requirements to apply the conceptual framework to comply with the fundamental principles and where applicable, be independent Personal qualities expected of an accountant The personal qualities that an accountant should demonstrate to meet the fundamental principles are: Ethical Considera琀椀on Group 14 Reliability: Ensure that work gets done and meets professional standards Accounting reliability refers to whether financial information can be verified and used consistently by investors and creditors with the same results Responsibility: Take control over your work Responsibility accounting is a kind of management accounting that is accountable for all the management, budgeting, and internal accounting of a company The primary objective of this accounting is to support all the Planning, costing, and responsibility centres of a company Timeliness: Be on time and produce work within a specified time frame The timeliness of accounting information refers to the provision of information to users quickly enough for them to take action Courtesy: Conduct oneself with courtesy and consideration towards clients and colleagues Courtesy is very important in life because when you are courteous people have a good impression of you and respect automatically follows, instead of hatred Professional qualities expected of an accountant The Code of Ethics stated four professional qualities expected from an accountant: independence, scepticism, accountability, and social responsibility Independence requires the accountant to complete the work without bias and prejudice An accountant when having an engagement with a client has to provide independent and accurate assessments, and not support or compete against the client for any personal interests Scepticism requires an accountant to be critical, an accountant should keep questioning all the information given to build his own opinion about its quality and reliability Accountability means that an accountant is accountable for all judgments and decisions In addition, work related to accounting and auditing can affect the public so accountants have a social responsibility Ethical Considera琀椀on Group 14 asset, a liability or for a business as a whole If an audit firm performs a valuation which will be included in financial statements audited by the firm, a self-review threat arises Audit firms should not carry out valuations on matters that will be material to the financial statements If the valuation is for an immaterial matter, the audit firm should apply safeguards to ensure that the risk is reduced to an acceptable level Matters to consider when applying safeguards are the extent of the audit client's knowledge of the relevant matters in making the valuation and the degree of judgement involved, how much use is made of established methodologies and the degree of uncertainty in the valuation Safeguards include: Second partner review, confirming that the client understands the valuation and the assumptions used, ensuring the client acknowledges responsibility for the valuation, and using separate personnel for the valuation and the audit 7.5 Taxation services The provision of taxation services is generally not seen to impair independence 7.6 Internal audit services A firm may provide internal audit services to an audit client in most jurisdictions However, it should ensure that the client acknowledges its responsibility for establishing, maintaining and monitoring the system of internal controls It may be appropriate to use safeguards, such as ensuring that an employee of the client is designated as responsible for internal audit activities and that the board or audit committee approve all the work that internal audit does 7.7 Corporate finance Certain aspects of corporate finance will create self-review threats that cannot be reduced to an acceptable level by safeguards Therefore, assurance firms are not allowed to promote, deal in or underwrite an assurance client's shares They are also Ethical Considera琀椀on Group 14 not allowed to commit an assurance client to the terms of a transaction or consummate a transaction on the client's behalf Other corporate finance services, such as assisting a client in defining corporate strategies, assisting in identifying possible sources of capital and providing structuring advice, may be acceptable in jurisdictions other than the US, providing that safeguards are in place, such as using different teams of staff, and ensuring no management decisions are taken on behalf of the client 7.8 Other services The audit firm might sell a variety of other services to audit clients, such as: IT services, Temporary staff cover, Litigation support, Legal services The assurance firm should consider whether there are any barriers to independence Examples include the firm being asked to design internal control IT systems, which it would then review as part of its audit, or the firm being asked to provide an accountant to cover the chief accountant's maternity leave The firm should consider whether the threat to independence could be reduced by appropriate safeguards In conclusion, apart from their auditing services, auditors may also provide non-audit services to clients However, they face a self-review threat in these circumstances A self-review threat arises when audit firms use the same team for nonaudit and audit services In most cases, the self-review threat is avoidable Ethical Considera琀椀on Group 14 Advocacy threat Advocacy threat occurs when a chartered accountant promotes a position or opinion on behalf of a client to the point that his or her subsequent objectivity may be compromised Circumstances capable of giving rise to such threats include the promotion of shares in a listed company which is also an audit client, advocating for an assurance client in litigation or dispute with third parties, or endorsement of a client's services or products To safeguards against advocacy threat, the firm should enlist the help of an additional chartered accountant outside of the assurance team to review the work or advise as necessary It may also need to segregate audit team members from the client, so as to ensure no damaging connection exists between two parties In case those options prove to be impractical or impossible, the firm should, at least, make certain that any amount owed to the clients should not be of enough significance to threaten auditors’ independence Family threat A family or association threat arises when independence is jeopardized as the audit firm and staff thereof become overfamiliar with the clients through direct or indirect bonds Connections that often generate this risk can be long association with assurance clients, existing employment contracts, close business or personal relationship This threat, for example, happens when a former partner or professional employee joins the client in a key position and has knowledge of the firm's policies and practices for the professional services engagement To make certain that family threats can no harm to the firm, it should remove the affected person from the audit engagement team as soon as possible Internally, regular rotation of audit personnel, both senior and junior, is also a viable Ethical Considera琀椀on Group 14 safeguards The firm should investigate and screen the auditors' relationship before they join the engagement as well 10 Intimidation threat An intimidation threat, as the name implies, manifests when members of the assurance team have reasons to be intimidated by the client Two most quintessential cases are when the client resorts to lawsuit or seeks second opinion The most obvious example of an intimidation threat is when the client threatens to sue, or indeed sues, the assurance firm for work that has been done previously The firm is then faced with the risk of losing the client, bad publicity and the possibility that they will be found to have been negligent, which will lead to further problems Another form of an intimidation threat is when the audit client is unhappy with a proposed audit opinion, and seeks a second opinion from a different firm of auditors The firm being asked for a second opinion should be very careful, because it is very possible that the opinion they form could be incorrect anyway if the director has not given them all the relevant information Firms giving a second opinion should ensure that they seek permission to communicate with the existing auditor and they are appraised of all the facts If permission is not given, the second auditors should decline to comment on the audit opinion In any case, to protect the firm’s interest before the intimidation threat, it must reduce the dependency on a single client or cut their leverage If necessary, the firm can consider leaving the client or ending their relationship In the event that the threat is indeed realized, experienced staff members or additional auditors should be involved to provide their expertise in dealing with such matters in their early stages III Case study Ethical Considera琀椀on Group 14 Fundamental Principles Confidentially Zoe is also concerned that Ali & Co might breach confidentiality were the audit firm to represent Stark in its dispute with the tax authorities Which of the following statements best reflects the auditor's duty of confidentiality? A Auditors must never, under any circumstances, disclose any matters of which they become aware during the course of the audit to third parties, without the permission of the client B Auditors may disclose any matters in relation to criminal activities to the police or taxation authorities, if requested to so by the police or a tax inspector C Auditors may disclose matters to third parties without their client's consent if it is in the public interest, and they must so if there is a statutory duty to so D Auditors may only disclose matters to third parties without their client's consent if the public interest or national security is involved Correct answer: C Confidentiality is one of the five fundamental ethical principles of auditors Regarding the confidentiality of the auditor's information, the auditor is only allowed to provide the client's information to a third party with the client's permission However, there are exceptions, when required by law (for example, when the auditor detects a fraudulent enterprise), the auditor is completely entitled to provide customer information without consulting them Answer A: The auditor should never provide information that is in any way false Auditors still have the right to provide information with the client's permission, or as required by law -> Incorrect Ethical Considera琀椀on Group 14 Answer B: Auditors are allowed to provide information to the police and tax authorities when the request is not accurate, the auditor is only allowed to provide information to the police and tax authorities when it is required by law , but not in any case -> Incorrect Answer D: Auditors are allowed to provide information to 3rd parties without the client's permission in case the request of the public and investigating agencies is not accurate The auditor is authorized to so when the interested parties are legally mandated to so -> Incorrect Danger of compromising fundamental ethical principles Exercise 1: You are the audit manager of Jones & Co and you are planning the audit of LV Fones Co, a listed company, which has been an audit client for four years and specialises in manufacturing luxury mobile phones During the planning stage of the audit you have obtained the following information The employees of LV Fones Co are entitled to purchase smartphones at a discount of 10% The audit team has in previous years been offered the same level of staff discount During the year the financial controller of LV Fones was ill and hence unable to work The company had no spare staff able to fulfil the role and hence a qualified audit senior of Jones & Co was seconded to the client for three months to cover the work of the financial controller The audit engagement partner has recommended that the audit senior work on the audit as he has good knowledge of the client The fee income derived from LV Fones was boosted by this engagement and, along with the audit and tax fee, now accounts for 16% of the firm's total fees (15.7% last year) Ethical Considera琀椀on Group 14 From a review of the correspondence files you note 20% of last year's audit fee is still outstanding 2.1 Threat & Safeguards You have also discovered that the audit engagement partner and the finance director have known each other socially for many years, and in fact went on holiday together last summer with their families to the finance director's villa Which TWO threats to independence are raised by this relationship and what safeguards should be applied? Threats A Familiarity and self-interest Safeguards Jones & Co to resign as auditors B Self-review and intimidation Rotation of audit engagement partner C Self-review and intimidation Jones & Co to resign as auditors D Familiarity and self-interest Rotation of audit engagement partner Correct answer: D LV's chief audit officer and chief financial officer have traveled together and have a close relationship for many years This can lead to threats related to familiarity and self-interest Both the audit director and the chief financial officer hold high positions, having great decision-making power in both organizations, so the independence of the audit team when participating in the audit of LV company is likely to be compromised affected To implement hedging measures, the audit firm does not have to withdraw from the audit, however, to ensure independence, the audit director conducts the audit of LV company (partner is responsible for with the LV company audit report) must be transferred to another person to ensure independence 2.2 High percentage of fees Ethical Considera琀椀on Group 14 Which of the following steps must Jones & Co take, as the fees from LV have exceeded 15% for the last two years? (1) Resign from the audit (2) Disclose the matter to those charged with governance (3) Arrange for a pre- or post-issuance review A only B only C only D and only Correct answer: D For auditing firms that perform public company audit services, including listed companies, the audit fee received from a client company should not exceed 15% of the audit firm's total audit revenue accounting for consecutive years In case the audit fee received from the client company exceeds 15% of the total revenue of the audit firm for two consecutive years, the audit firm must be responsible for explaining and informing the management board of the client company and arrange additional levels of review of the audit report (both before and after the audit report is issued) to ensure that the audit opinion is expressed appropriately 2.3 Other services that can be offered together The finance director of LV has made some enquiries about the other services that Jones & Co may be able to assist with Which TWO of the following other services would Jones & Co be able to provide to LV? (1) Design and implementation of IT systems over financial reporting (2) Assistance with preparation of tax return (3) Accounting services (4) Recruiting service for the position of credit controller Ethical Considera琀椀on Group 14 A (1) and (2) B (2) and (3) C (2) and (4) D (3) and (4) Correct answer: C The audit firm may provide other services besides the audit of financial statements for the client company provided that the other services not directly affect the financial statements or the management of the client company The provision of certain types of services presents the potential for threats to the independence of the audit firm that inadequate safeguards reduce this risk to an acceptable level For example, providing information technology services (1), accounting services (3), The audit firm can assist the client with the procedures for tax refund (2) because the audit firm only provides support, and the responsibility still belongs to the client company Besides, the audit firm can support/provide recruitment services for the client's company in low positions (eg: credit control, ); For senior management positions, the audit firm is not allowed to assist the client in recruiting because this may affect the independence of the audit firm when performing an audit of that client Exercise 2: You are an audit manager of Ali & Co and have just been assigned the audit of Stark Co (Stark) Stark, a listed company, provides investment advice to individuals, and is regulated by the relevant financial conduct authority Mr Day, a partner in Ali & Co, has been the audit engagement partner for Stark for the previous nine years and has excellent knowledge of the client Mr Day has informed you that he would like his daughter Zoe to be part of the audit team this year; Zoe is currently studying for her first set of exams for her ACCA qualification Ethical Considera琀椀on Group 14 In an initial meeting with the finance director of Stark, you learn that the audit team will not be entertained on Stark's yacht this year; instead, he has arranged a balloon flight costing less than one-tenth of the expense of using the yacht and hopes this will be acceptable Ali & Co has always carried out tax advisory work for Stark The tax advisory services not have an impact on the figures reported in the financial statements The finance director has stated that he feels strongly that the firm that offers taxation services this year should charge a fee which is based on a percentage of tax saved He also trusts that your firm will accept a fixed fee for representing Stark in a dispute regarding the amount of sales tax payable to the taxation authorities 2.4 Identify Threats From a review of the information above, your audit assistant has highlighted some of the potential risks to independence in respect of the audit of Stark (1) Mr Day would like his daughter Zoe to be part of the audit team (2) Audit team to be offered a balloon flight (3) Tax fee to be based on a percentage of tax saved (4) Firm to represent Stark in a dispute with the tax authorities Which of the following options best identifies the valid threats to independence and allocates the threat to the most appropriate category? Advocacy A (3) Intimidation Self-interest and (3) only (1) and (2) (4) B (4) only (3) only (2) and (3) C (3) only (3) and (4) (2) only Ethical Considera琀椀on D (3) and (1) and (4) Group 14 (1) and (2) (4) Correct answer: B (1)Mr Day's daughter - director of Ali audit company, is a member of the audit team for Stark company This is an unusual case, however, Zoe is just studying at the basic level of ACCA certification, so Zoe's role and decision power in the outcome of the audit is very small, therefore, Zoe is members directly participating in the audit of Shark company, not pose a serious risk to the audit results (2) The audit team was given a hot air balloon flight - an expensive gift, which poses a risk of self-interest to the auditors The auditors may be inclined to express the audit opinion desired by the client in order to benefit from the hot air balloon flight → self-interest (3) Stark pays Ali's tax service fees on top of the taxes Ali saves Stark This, directly affects Ali's interests The more Ali helps Stark reduce his tax bill, the more Ali will receive tax advice In order to get as much compensation as possible, Ali will try to reduce the tax costs as much as possible This is a manifestation of the risk of benefit → self-interest In addition, Ali wanted to receive remuneration from the tax service provided, he had to give his opinion according to Stark so that Ali would not lose customers, then, Ali's opinion was dependent on Stark → Intimidation (4) Stark hopes Ali will represent Stark in defense before the tax authorities → Advocacy Common Threats: Auditing firms and client companies have a long-standing relationship In relation to the audit engagement partner holding the role for nine years: Which of the following safeguards should be implemented in order to comply with ACCA's Code of Ethics and Conduct? Ethical Considera琀椀on Group 14 A An independent review partner should be appointed to the audit B The audit engagement partner should be removed from the audit team but may serve as a quality control reviewer C Ali & Co should not audit Stark for a two-year period D The audit engagement partner should be removed from the audit team Correct answer: D Ali's audit director participated in the Stark audit for years Stark is a listed company, so according to IFRS regulations, the audit director and audit team members are only allowed to participate in the audit of a company for a maximum of years, after which they must rotate an audit team other audit It is possible to appoint another independent partner to perform the operation of the audit in place of Mr Day Mr Day should not be involved in the Stark client audit in any capacity, and Mr Day should have a cooling-off period of approximately years before being appointed audit director conduct the audit of the company Stark Ethical Considera琀椀on Group 14 Reference AB - F1 - BPP Study Text 2020 - Accountant in Business (2020) BPP Learning Media Minh Thuy Tran (n.d.) [AA/F8: Tóm tắt kiến thức] Lesson 4: Đạo đức nghề nghiệp (Professional Ethics) Retrieved from SAPP Education: https://knowledge.sapp.edu.vn/knowledge/aa/f8-t%C3%B3m-t%E1%BA %AFt-ki%E1%BA%BFn-th%E1%BB%A9c-lesson-4-%C4%91%E1%BA %A1o-%C4%91%E1%BB%A9c-ngh%E1%BB%81-nghi%E1%BB%87pprofessional-ethics?fbclid=IwAR04RiBZRP-Cf4mf8tDB4dcb-SO_mTTSJehLSYG0dT8WCL8yUvAxc888SA https://www.trendingaccounting.com/2021/12/why-do-accountants-need-to-beethical.html https://outbooks.com/the-importance-of-ethical-accounting/ https://www.icaew.com/-/media/corporate/files/technical/ethics/icaew-guidancepublic-interest-responsibility-of-accountants.ashx?la=en https://www.ifac.org/about-ifac/membership/members/association-charteredcertified-accountants-acca https://www.ifac.org/knowledge-gateway/building-trustethics/discussion/international-code-ethics-professional#:~:text=The %20fundamental%20principles%20within%20the,of%20its%20public%20interest %20responsibility More from: ACCA Orientation Trường Đại học… 95 documents Go to course F6vnm 2017 dec q 12 practice questions ACCA Orientation 100% (2) ACCA 2022 516 Workbook (02) ACCA Orientation 100% (2) 1652158032173691 13 FM Mock test ACCA Orientation 100% (2) Oxford - Solutions 34 Intermediate… ACCA Orientation Recommended for you 73% (37) KLE - BIG4 Practice 23 TEST accounting 100% (2) ACCA AFM Note 146 Opentution accounting 100% (1) Letter of apology ịiifb vvhughfdb hfbufibhi accounting 100% (1) - sách hay accounting 100% (1)