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- 5 Marks
Question
The IFAC International Ethics Standards Board for Accountants (IESBA) Code of Ethics for Professional Accountants sets out the five fundamental principles of professional ethics and provides a conceptual framework for applying those principles. Professional Accountants must apply this conceptual framework to identify threats to compliance with the principles, evaluate their significance, and apply appropriate safeguards to eliminate or reduce them so that compliance is not compromised.
Required: Identify FIVE major threats identified in the code of ethics, giving examples of each
Answer
- Self-interest threats: This occurs when financial or other interests of the accountant or their family members may influence their decision-making. Example: Having a financial interest in a client or being overly dependent on fees from a client.
- Self-review threats: This happens when an accountant is required to re-evaluate their own work or previous judgments. Example: Auditing financial statements that the accountant previously prepared.
- Advocacy threats: This arises when an accountant promotes a client’s position or opinion to the extent that their objectivity may be compromised. Example: Representing a client in legal disputes.
- Familiarity threats: This occurs when an accountant becomes too close to a client, leading to a lack of professional skepticism. Example: A close personal relationship with a client’s director.
- Intimidation threats: This occurs when an accountant is deterred from acting objectively due to real or perceived pressures. Example: Being threatened with dismissal by a client if the accountant does not comply with their demands.
- Tags: Code of Ethics, IESBA, IFAC, Professional Ethics, Safeguards, Threats
- Level: Level 2
- Topic: Professional and Ethical Considerations
- Series: MAY 2017
- Uploader: Theophilus