Podcast
Questions and Answers
What must a professional accountant do before assuming custody of a client's money or assets?
What must a professional accountant do before assuming custody of a client's money or assets?
Which of the following best describes independence in mind for a professional accountant?
Which of the following best describes independence in mind for a professional accountant?
What is a primary factor that compromises a professional accountant's objectivity?
What is a primary factor that compromises a professional accountant's objectivity?
Which practice helps maintain a professional accountant's objectivity when dealing with client assets?
Which practice helps maintain a professional accountant's objectivity when dealing with client assets?
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Which of the following behaviors demonstrates a self-interest threat for a professional accountant?
Which of the following behaviors demonstrates a self-interest threat for a professional accountant?
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What is a potential threat to an accountant's independence during review engagements?
What is a potential threat to an accountant's independence during review engagements?
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What is the primary concern when a professional accountant develops a close familiarity with a client?
What is the primary concern when a professional accountant develops a close familiarity with a client?
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How should a professional accountant handle the income generated from client assets?
How should a professional accountant handle the income generated from client assets?
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Which statement accurately reflects the role of advocacy in an accountant's professional conduct?
Which statement accurately reflects the role of advocacy in an accountant's professional conduct?
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What is a critical requirement for a professional accountant when providing non-assurance services to a client?
What is a critical requirement for a professional accountant when providing non-assurance services to a client?
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What primarily gives rise to a self-interest threat to independence?
What primarily gives rise to a self-interest threat to independence?
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Which action should not be taken if a team member holds a financial interest in an audit client?
Which action should not be taken if a team member holds a financial interest in an audit client?
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What should be considered when assessing the materiality of a loan guarantee to a client?
What should be considered when assessing the materiality of a loan guarantee to a client?
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Which of the following would most likely lead to a familiarity threat?
Which of the following would most likely lead to a familiarity threat?
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How can the evaluation process be revised to alleviate self-interest threats?
How can the evaluation process be revised to alleviate self-interest threats?
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What is a safeguard that can address self-interest threats effectively?
What is a safeguard that can address self-interest threats effectively?
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What characterizes a non-assurance service in the context of independence?
What characterizes a non-assurance service in the context of independence?
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What threat to independence can arise from a partner's role in promoting non-assurance services?
What threat to independence can arise from a partner's role in promoting non-assurance services?
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What should never be allowed in relation to a client’s directors or officers?
What should never be allowed in relation to a client’s directors or officers?
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Which principle is primarily compromised by intimidation threats?
Which principle is primarily compromised by intimidation threats?
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What safeguard is recommended when an audit team member receives significant gifts from a client?
What safeguard is recommended when an audit team member receives significant gifts from a client?
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Under what condition can an auditor accept loans from an audit client?
Under what condition can an auditor accept loans from an audit client?
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What is a fundamental principle at risk when an audit team has financial interests in their client's business?
What is a fundamental principle at risk when an audit team has financial interests in their client's business?
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What is the best approach for handling potential threats arising from close relationships with audit clients?
What is the best approach for handling potential threats arising from close relationships with audit clients?
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Which practice is considered a safeguard against self-interest threats related to compensation schemes?
Which practice is considered a safeguard against self-interest threats related to compensation schemes?
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Which of the following would represent a self-interest threat for a professional accountant?
Which of the following would represent a self-interest threat for a professional accountant?
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What is a significant factor that a professional accountant must assess when evaluating a potential conflict of interest?
What is a significant factor that a professional accountant must assess when evaluating a potential conflict of interest?
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In the context of providing non-assurance services, which scenario is most likely to threaten an accountant's objectivity?
In the context of providing non-assurance services, which scenario is most likely to threaten an accountant's objectivity?
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Which practice is considered a breach of the principle of objectivity?
Which practice is considered a breach of the principle of objectivity?
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Which of the following describes a familiarity threat?
Which of the following describes a familiarity threat?
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Advocacy threats can significantly impact professional accountants when they:
Advocacy threats can significantly impact professional accountants when they:
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Which of the following is an example of a safeguard against self-interest threats?
Which of the following is an example of a safeguard against self-interest threats?
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Which scenario represents an intimidation threat for an accountant?
Which scenario represents an intimidation threat for an accountant?
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To maintain professional competence, accountants must:
To maintain professional competence, accountants must:
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Which action is NOT recommended to manage self-review threats effectively?
Which action is NOT recommended to manage self-review threats effectively?
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When faced with threats to independence, a professional accountant should first:
When faced with threats to independence, a professional accountant should first:
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Which of the following conditions may contribute to an objectivity threat?
Which of the following conditions may contribute to an objectivity threat?
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How can advocacy threats best be mitigated for a professional accountant?
How can advocacy threats best be mitigated for a professional accountant?
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Which principle must an accountant uphold when faced with threats to integrity?
Which principle must an accountant uphold when faced with threats to integrity?
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When an accountant is approached for a favor by a relative involved in their accounting work, this presents a threat to:
When an accountant is approached for a favor by a relative involved in their accounting work, this presents a threat to:
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Study Notes
Ethics
- SAICA's Code of Professional Conduct governs ethical conduct for South African Chartered Accountants.
- SAICA's Constitution and By-Laws also outline ethical guidelines.
- The reference material is the Auditing Fundamentals Chapter 2 of the 2023/2024 SAICA Handbook, Volume 2B.
Module Structure
- The module begins with Background & Introduction.
- Then, rules of improper conduct are covered.
- The Auditing Profession Act (relevant sections) are investigated.
- SAICA's Code of Professional Conduct is a module component.
- The SAICA Constitution & By-Laws comprise the final module section.
Code of Professional Conduct (Parts)
- Part 1: Covers the general application of the code. This section spans from ET 1 to ET 43.
- Part 2: Focuses on Professional Accountants in Business (ET 43-ET 69).
- Part 3: Focuses on Professional Accountants in Public Practice (ET 69-ET 105).
- Part 4A: Addresses independence for audit and review engagements.
- Part 4B: (if applicable)
- Further parts (if applicable)
Code of Professional Conduct Definitions
- Assurance engagements (e.g., audit, review) and other assurance engagements are defined.
- Direct Financial Interests and Indirect Financial Interests are differentiated based on level of control.
- Immediate and Close Family relationships are defined.
- Chartered Accountant responsibilities in business and public practice are outlined.
- Professional services (e.g., audit, review, tax) are specified.
Conceptual Framework - Step 1A: Identify Threats (120.6 A3)
- Advocacy: Promoting a client's position so strongly that objectivity is compromised.
- Familiarity: Developing too sympathetic or accepting relationships with a client.
- Self-review: Failing to properly evaluate the results of prior decisions or services.
- Intimidation: External pressures influencing a professional accountant's objectivity
- Self-interest: Personal financial or other interests impacting professional judgement.
Conceptual Framework - Step 1B: Fundamental Principles (111)
- Integrity: Requiring straightforwardness, honesty, and fair dealings.
- The professional is not to be knowingly associated with materially false or misleading information.
- Any potentially misleading, misleadingly omitted or obscured required information must be dealt with, unless the professional modifies their report or takes steps to disassociate from it becoming aware of it.
Conceptual Framework - Step 2: Evaluate the level of the threat
- Assess whether the threat level is acceptable by using the RITP (Reasonable Informed Third Party) test to determine if the professional's actions and actions will comply with all fundamental principles.
- Considerations include quantitative and qualitative factors, combined effect of multiple threats, conditions, policies and procedures, (e.g. corporate governance, professional requirements).
Conceptual Framework - Step 3: Implement steps to address the threat
- If the threat is not at an acceptable level, the professional must take steps to eliminate circumstances or use safeguards.
- This step involves further action to review judgements and conclusions made and use the RITP test to determine if appropriate steps are taken.
Professional Competence & Due Care
- Maintaining and improving professional knowledge and competence.
- Acting diligently, carefully, thoroughly, and timely.
- Following relevant legislation and standards for ensuring competent service.
- Supervisors must ensure staff training and supervision; provide awareness of any limitations.
- Avoidance of engagements the professional is not competent to perform is necessary.
Confidentiality
- Respecting information gained from professional and business relationships.
- Avoiding inadvertent disclosure (especially in social or family settings).
- Respecting information shared by prospective clients and employers even after the relationships ends.
- Using careful professional judgement to determine the type of communication and recipients when disclosing confidential information.
Professional Behaviour
- Adhering to all relevant laws and regulations.
- Acting in the public interest in all professional activities.
- Avoiding conduct that could harm the profession.
- Evaluating how a reasonable and informed third party would respond to the professional's conduct.
- Honoring principles of Honesty, Truthfulness, and Good Taste when doing marketing.
Professional Behaviour - Publicy, Advertising, and Solicitation
- Honoring principles of Honesty and Truthfulness.
- Avoid exaggeration, and be careful of comparisons to the work of others.
Professional Behaviour - Multiple Firms
- Being a member of multiple firms does not eliminate the need for distinction between the firms and individual members.
- Requirements of the firm are to be followed.
Professional Behaviour - Signing Convention of Reports
- Rules must be followed.
Professional Behaviour - Confidentiality
- Circumstanced when confidentiality can be breached are outlined.
- Professional responsibilities relate to disclosure are explained.
- Consideration for parties harmed when disclosing information is required
- Appropriate type of communication and recipients is necessary for disclosure.
SAICA CPC Part 2: Examples of Threats
- Potential threats to objectivity regarding advocacy, self-review, intimidation, familiarity, and self-interest.
SAICA CPC Part 2: Evaluation of Threats
- Factors in the work environment that impact threats, such as leadership promoting ethical behaviour, policies and procedures for communicating issues, strong internal controls, competent personnel recruiting, timely policy communication, and ethics and conduct policy.
- These factors are essential for evaluating the professional's conduct.
SAICA Code of Professional Conduct (Part 2) Situations
- Discusses essential sections for conflicts of interest, pressure to breach, inducements, financial interests, acting with sufficient expertise.
Conflict of Interest (210)
- Threats to objectivity.
- Safeguards outline how to address these threats.
Preparation and Presentation of Information (220)
- Factors can influence how information is presented.
- Safeguards show how to prevent misrepresentation.
Acting with Sufficient Expertise (230)
- Professional Competence and Care are paramount and are shown to influence the assessment.
Financial Interests (240)
- Ways to look for financial interests are outlined.
- Financial interests can be conflicts of concern, so precautions must be taken.
Inducements and Hospitality (250)
- Types of threats.
- Necessary safeguards to take.
Pressure to Breach Fundamental Principles (270)
- Threats and considerations.
- Required safeguards.
SAICA CPC Part 3: Examples of Threats (300.6A1)
- Potential threats (advocacy, self-review, intimidation, familiarity, and self-interest).
SAICA CPC Part 3: Evaluation of Threats (300.7)
- Factors in the client and firm operating environments.
Examples of Safeguards (300.8)
- Different safeguards to address individual threats; such as additional staff, different team members, or another firm performing the service.
SAICA CPC Part 3: Situations
- Situations that affect professional appointments, second opinions, fees, other remunerations, custody of client assets, inducements, gifts and hospitality.
Professional Appointments (320)
- Factors that relate to professional appointments.
Second Opinions (321)
- Factors influencing second opinions.
- Safeguards to maintain objectivity and professional conduct.
Fees and other Remuneration Types (330)
- Factors affecting fee structures including client awareness, independence of 3rd parties, and the structure of the fee itself.
- Safeguards are stated regarding fees.
Custody of Client Assets (350)
- Considerations for custody of client assets.
- Safeguards relating to conflicts of interest.
Litigation (430)
- Factors influencing litigation issues.
Financial Interests (510)
- Evaluating the materiality of a financial interest.
- Safeguards in case of relevant threat
Loans and Guarantees (511)
- Circumstances when independence may be jeopardized by loans or guarantees from a client or an immediate family member.
Business Relationships (520)
- Evaluating the materiality of a business relationship.
- Threats to independence of a professional accountant's business relationships.
Family and Personal relationships (521)
- Potential threats arising from family relationships.
- Factors include positions held by family members and roles of the audit team, as well as the nature or relationship, length of time, or other influences.
- Safeguards to take.
Serving as Director of Audit Client (523)
- Potential threats arising from serving as a director of an audit client;
- Factors relate to the duties involved in client management.
- Safeguards to take.
Employment with Audit Client (524)
- Factors to evaluate for threat; such as the time spent or role involved with the client.
Temporary Personnel Assignments (525)
- Factors of personnel assignments; such as short term.
Long Association with Audit client (540)
- Factors for a long standing association.
Non-assurance Services to Audit Client (600)
- How to evaluate non-assurance services to audit clients; including factors like clients, services, and fees.
- Threats present to safeguard objectivity; such as independence.
Subsection 601: Accounting & Bookkeeping (601)
- Factors and considerations related to this subsection.
- Threats and how to maintain objectivity/independence.
- Safeguards that can be employed.
Subsection 602: Administrative services (602)
- The focus of administrative services.
- Factors and safeguards are stated, including threat analysis.
Subsection 603: Valuation services (603)
- Factors for valuation services.
Subsection 604: Tax Services (604)
- Factors and considerations for tax services.
- The requirements to maintain objectivity are stated.
Subsection 605: Internal Audit Services (605)
- Factors influencing internal audit services to improve their objectivity and independence.
- How to evaluate these concerns.
SAICA Constitution
- Includes details of associates, trainees, and membership.
- Outlines the reserved designations for members.
SAICA By-Laws Appendix 4
- The roles of the Disciplinary Process, the Designated Disciplinary Officer, and the Professional Conduct Committee.
- Procedures under the By-Laws and the required steps for cases outside are stated.
- Processes for dealing with complaints from media reports are covered.
Independance for Audit & Review Engagements (Part 4A)
- Define Independence of mind and Independence in appearance.
- Circumstances when a professional accountant's independence in mind/appearance, and professional skepticism may be compromised.
Compensation and Evaluation (411)
- This section relates to the principles, factors and considerations for audit clients' remuneration.
- It includes how the audit firm and client can avoid or limit potential threats.
Gifts and Hospitality (420)
- Procedures to follow when gifts or hospitality are offered.
- Safeguards outlined to maintain the independence of a public company.
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