Professional Ethics for Accountants Quiz

Maintaining Professional Competence

• Professional competence is a critical aspect of the accounting profession, requiring ongoing development and adherence to ethical standards.
• Diligence involves carrying out professional assignments with due care, thoroughness, and a commitment to achieving the highest standards of quality.
• The principle of confidentiality dictates that a professional accountant should respect the confidentiality of information obtained during professional engagements and should not disclose such information without proper authority or consent.
• An accountant must ensure those working under their authority comply with the ethical principles and standards of the profession.
• Continuing Professional Development (CPD) is a key aspect of professional competence, requiring accountants to engage in activities that maintain and enhance their knowledge, skills, and professional capabilities.

The Code of Ethics and Fundamental Principles

• The introduction section of the Code explains the purpose and scope of the ethical standards set forth.

• The principle of integrity requires accountants to be straightforward and honest in all professional and business relationships.

• If legal or regulatory requirements prevent compliance with parts of the Code, the accountant should take steps to disclose the conflict and seek appropriate advice.

• If an accountant becomes aware of being associated with misleading information, they must take necessary steps to disassociate themselves from the information and inform the relevant authorities, if necessary.

• Objectivity implies that accountants should not allow bias, conflict of interest, or undue influence to affect their professional judgment.

• Confidentiality is essential in preserving the trust and relationships between accountants and their clients and stakeholders.

Application and Compliance

• The application materials within the Code provide guidance on interpreting and applying the principles in real-world scenarios.
• An accountant may be considered compliant despite modifying reports if the modifications are necessary to maintain ethical standards and comply with reporting requirements.
• To ensure competent professional service, an accountant must maintain adequate knowledge and skills, exercise due care in their work, and continually develop their capabilities.
• Integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour are fundamental ethical principles of the accountancy profession.
• Objectivity could be breached if an accountant favors a particular client or stakeholder over another, leading to biased judgments and decisions.
• Fairness is emphasized by the principle of objectivity, ensuring that all parties in professional relationships are treated equitably.

Other Relevant Principles and Compliance

• To fulfill the objectives of the accountancy profession, professional accountants must uphold and practice the fundamental ethical principles.
• Diligence demands that accountants exercise professional judgment and dedicate sufficient time and effort to assignments.
• A breach of professional competence and due care could occur if an accountant fails to adhere to professional standards, perform work inadequately, or neglect to update their skills.
• Accountants should refrain from associating themselves with statements that are misleading or lack a reasonable basis.
• Accountants are not required to investigate every potential irregularity or non-compliance, but they should exercise professional judgment to determine when further investigation is warranted.
• Professional accountants are required to stay informed about laws and regulations, relevant professional pronouncements, and changes in legislation.

Non-Compliance with Laws and Regulations (NOCLAR)

• NOCLAR (Non-Compliance with Laws and Regulations) distinguishes itself from SA 250 by expanding on the auditor's responsibilities and providing guidance on the auditor's role in addressing non-compliance.
• Under NOCLAR, an accountant may disclose a breach if they have a legal or professional obligation to do so, if there is an imminent risk of harm, or if the disclosure is permitted by law and regulations.
• SA 250 mandates that auditors have responsibilities related to planning and performing the audit to obtain sufficient appropriate audit evidence to detect material misstatements arising from non-compliance.
• NOCLAR defines stakeholders as individuals or entities that have a legitimate interest in the organization or its activities.
• A professional accountant's responsibilities do not encompass regulating or enforcing the compliance with laws and regulations.
• The term 'non-compliance' in NOCLAR refers to violations or instances of non-conformance with applicable laws, regulations, or other standards.

Second Office Regulations for Chartered Accountants

• The maximum allowable distance for a second office from the municipal limits of the city where the first office is located is 50 kilometers.
• A chartered accountant can have a second office without it being in the charge of another member only for purposes of practicing in that city.
• When having two offices, a chartered accountant must make a declaration stating that they are in charge of both offices.
• If a chartered accountant has two offices within the same city, both offices must be under the charge of a member.
• Mr. K's second office maintained a 20 kilometer distance from his first office in the suburbs of Chennai.
• If a chartered accountant intends to open a new office near an income tax department, they must obtain permission from the Institute.
• An exemption for having a second office is granted if the office is within the city or municipal limits.
• Mr. K employed a non-member for running his new office near the income tax office.

Penalties and Certificate of Practice

• The penalty for a person who falsely represents themselves as a member of the Institute of Chartered Accountants on first conviction is imprisonment for a term that may extend to six months or a fine that may extend to Rs. 10,000, or both.
• A practicing Chartered Accountant is defined as any member who holds a valid Certificate of Practice issued under the Chartered Accountants Act.
• The Certificate of Practice issued under Section 6 is significant because it authorizes a member to practice as a chartered accountant.
• If a member breaches certain prescribed circumstances, their Certificate of Practice can be suspended or canceled.
• The possible imprisonment duration for a second conviction under Section 24 of the Chartered Accountants Act is a term that may extend to two years, and a fine that may extend to Rs. 50,000.
• Individuals who are employees of government departments are exempt from needing a Certificate of Practice for a limited time.
• The maximum fine for subsequent convictions under Section 24 is Rs. 1 lakh.
• In the case of Prem Batra, the court, having found the accused guilty, ordered a sentence of 15 months imprisonment.