2024 Ethics Term 3 English PDF

+ ETHICS *Code of Professional Conduct of the South African Institute of Chartered Accountants (SAICA) *Constitution and By-Laws of SAICA REFERENCE: Auditing Fundamentals Chapter 2 SAICA Handbook 2023/2024 Vol 2B +...

+ ETHICS *Code of Professional Conduct of the South African Institute of Chartered Accountants (SAICA) *Constitution and By-Laws of SAICA REFERENCE: Auditing Fundamentals Chapter 2 SAICA Handbook 2023/2024 Vol 2B + 5 Code of Professional Conduct PART 1: General application of the Code PART 2: Professional Accountants in Business PART 3 & Loading… PART 4A & Professional Accountants in Public Practice · PART 4B: · · + 9 CODE OF PROFESSIONAL CONDUCT: PART 1: General application of the Code ET 1 – ET 43 + 10 Code of Professional Conduct Definitions (ET 12 – 25) Assurance engagement Non-assurance engagements Audit (ISA 200) and Review engagements (ISRE 2400) Other assurance engagements Direct Financial Interest Indirect Financial Interest Owns / under control of No control / cannot influence individual/ influence investment investment decision decision Contingent fees Immediate family Close family Spouse/ equivalent or dependant Parent, child, sibling, NOT immediate Chartered Accountant: in business in public practice Professional services For example: Audit, review, tax, advisory services…  Conceptual Framework + 12 Step 1A: Identify Threats (120.6 A3) Self-review Intimidation Professional Accountant does Professional not properly evaluate the Accountant is Advocacy results of a decision previously deterred from Promoting of a position made or services delivered on acting objectively of a client to such an which the PA will rely when by real or extent that objectivity forming judgement as part of a perceived might be current service. pressures, compromised. Focus on client including attempts to exercise undue influence over the PA. Familiarity Self-interest Threat that Type of threat for Financial or other Professional Fundamental interests of accountants become Principle: Professional too sympathetic Accountant can towards the interests Confidentiality influence PA’s of a client or too Professional judgement accepting of their Competence and/or behaviour work due to a long and Due Care improperly. or close Professional Behaviour relationship with If PA can be held liable/ lose title AND Integrity none of the other threats applicable them. Objectivity + 14 Step 1 B: Fundamental principles INTEGRITY REQUIRES ….(S111) Being straightforward Being honest Fair dealings Not knowingly being associated with information which you believe: is materially false or misleading is provided recklessly misleadingly omits or obscures required info …… unless you modify your report …… or take steps to disassociate yourself when you become aware + 15 Objectivity (S112) Not compromising professional or business judgements because of: bias conflict of interest undue influence of others Not undertake a professional activity if your professional judgement might be unduly influenced by a: circumstance relationship + 16 PROFESSIONAL COMPETENCE & DUE CARE REQURES …(S113) Attain & maintain professional knowledge and skill to ensure competent service, based on technical & professional standards & relevant legislation Act diligently ( carefully, thoroughly , timely) in accordance with applicable technical and professional standards Ensuring appropriate training & supervision of those working under you Where appropriate , making clients & employers aware of your limitations Avoiding engagements that you are not competent to perform + CONFIDENTIALITY ( S114) 17 Professional Accountants required to respect information acquired as result of professional & business relationships and (114.1): Avoiding inadvertent disclosure , including in a a social environment, particulary to a close business associate or immediate family Inside organisation / firm Information disclosed by prospective clients / employers After the end of the relationship Not using confidential information to benefit yourself or a third party Taking reasonable steps to ensure those advising, or working under, you also respect confidentiality + S114 REQUIRES / ALLOWS YOU TO 18 BREACH CONFIDENTIALITY Circumstances where it may be required to disclose confidential information: (114.1 A1) permitted/required by law or authorised by client, for example: production of documents in legal proceedings or disclosure to public authorities of infringements (including reportable irregularities; S45 APA) professional duty or right to disclose if not prohibited by law: To comply with the quality review of the Regulatory Board or professional body To respond to an inquiry or investigation by the Regulatory Board or other regulatory body To protect the professional interests of a chartered accountant in legal proceedings To comply with technical standards and the requirements of the Code + CONFIDENTIALITY (S114) 19 In deciding whether to disclose confidential information, consider: (114.1 A2) Interest of any parties harmed if client consents All info known & substantiated. If not – use professional judgement to decide on the type of disclosure, if any. Type of communication, to whom? Are the recipients to whom the information is communicated to, appropriate? + PROFESSIONAL BEHAVIOUR... 20 (S115) Comply with relevant laws & regulations Behave in a manner consistent with the professions responsibility to act in the public interest in all professional activities and business relationships Avoid any conduct that the professional accountant knows or should know might discredit the profession. How would a reasonable and informed third party have reacted weighing all the specific facts and circumstances available? + Professional behaviour (S115) 21 Publicity, advertising and solicitation (115.2) → When marketing shall be Honest and truthful Not make exaggerated claims for services able to offer, qualifications or experience Not disparaging references or unsubstantiated comparisons to the work of others Avoid bringing the profession into disrepute For example: Material’s content and presentation: Objective Good taste Medium consistent with profession + Professional behaviour (S115) 22 Multiple Firms (115.3 – 115.4): Professional Accountants may be members of more than one firm (firm which is a registered auditor AND provides professional services) Must be distinction between firms and members Must comply with S 41(1) and/or S 41(2) of APA If not a RA may not: - Perform audits, APA! - present themself as RA, - Not use RA to describe themselves, - Lead people to believe registered as RA Signing convention of reports (115.5-115.6) Shall not delegate to any one not his partner/director (of any assurance reports or services as required by laws and regulations) If sign report, sign : name, capacity if partner/director their designation underneath their name firms name if not set out on letterhead Use of electronic signatures (115.7) + 29 CODE OF PROFESSIONAL CONDUCT: PART 2: Professional accountants in Loading… business ET 43 – ET 69 + SAICA CPC Part 2 Examples of threats 31 (200.6 A1) SELF STUDY make applicable for PA in business Self-review Intimidation Advocacy Determining appropriate Threat of dismissal or Opportunity to manipulate accounting treatment for replacement over a disagreement prospective information to business combination after about application of an accounting obtain favourable financing performing feasibility study principle or the way in which reporting on fin information is conducted Dominant personality attempting to Familiarity influence decision making processes Responsible for the financial reporting when family member makes decisions that affect the entity’s financial reporting Self-interest Long association with business contacts influencing business decisions Financial interests, loans or guarantees Incentive compensation arrangements Inappropriate personal use of corporate assets Family member refers to close or immediate Gift or special treatment offered from supplier family Employer has Own code of conduct All sections need to know once know PA in B 3 decide which is applicable  Yellow Treats to fundamental prin & 310 + Orange pink = Factors for Definition lev of threat Reg : him = Red 34 Conflict of Interest (210) Blue = Examples Green-safeguards Notes: A PA shall NOT allow conflict of interest to compromise their professional business a judgement Examples matter for who's interest matter · undertaking professional actu related to a particular 2 more parties regarding conflict for choosing a vendor org that family member · Threat(s) Fundamental Evaluate the level of Address the threats: principle(s) threat: Factors Safeguards 1) Nature of relevant interests relationships between 11 Restructure segregation certain resp duties Self Interest involved parties objectivity 2) withdraw from decision making process 2] Activity & it's implications for relevant parties 3] Obtain appropriate oversight In General , more direct connection between professional actv the matter on which parties interest conflict likely the level of threat&acceptable level  be implemented PA should refuse to be remain If Safeguards CAN'T , associated with the information I prepare present info that 17 Discuss concerns with 1) self-interest 11 Integrity 2) Intimidation 2] Objectivity according torelevana Superiors 2] Discuss Advocacy 3) Professional 27 Prep present info in manner policy procedures compotence that intended not to mislead of employing org on how influence contractual reg to address matters internally 47 Due care Outcomes in approprietly 37 Resign 37 NOR Omit anything w intent. Of render misleading info contract outcomes in appr. reg + 36 Acting with sufficient expertise (230) Notes: Examples · Insufficient time for performing completing relevant duties Incomplete restricted in adequate info to perform duties · experience, training education Insufficient t · Threat(s) Fundamental Evaluate the level of Address the threats: principle(s) threat: Factors Safeguards 1) Extent 1) Obtaining assistance from Self Interest 1) Professional Competence to which a professional acc. training is 2) Due care working with others someone w necessary expertise 2) Relative Seniority of the PA in business 27 Ensure time that there adequate available for performing the event 3) Level of supervision & review applied to work 3) Decline to perform duties + 37 Financial Interests (240) Notes: Doesn't factors have safeguards use Examples Equity · financial interest held Having knowing · Loan by immediate close family members Threat(s) Fundamental Evaluate the level of Address the threats: principle(s) threat: Factors Safeguards [] 17 significance of financial int 4) Internal I external audit self-interest Objectivity procedure ↳ Depends on personal circumstance that specific to address issues 2) confidentiality E of fin int to individual that give rise to financial interest materiality 2) Policy & procedures for committee indep of managem to det lev form of Senior man remuneration 3) In acc winternal policies & disclosure of those charged w gov ↳ All rel inte plans exercise entitlement trade in relevant shares  can fr minor acts between colleagues to acts that result in Forms : range Gifts non-compliance wlaws regulations · Hospitality · · Entertainment · Donations · Friendship loyalty Employment · commercial opps Object Situation action used as means to influence other indiv behaviour but NOT Pref treatment, properly influence indiv behaviour · nec w intent to in privilages rights 1) Self-interest 13 1) Nature , frequency value 17 Inform Senior management Integrity & cum effect on , inducement 2] 2) Objectivity 2) Amend Familiarity 2) offered tel terminate business 3) Intimidation 31 Professional Timing when relationships offer behaviour to action dec any When eval threat level consider : 3) Whether inducement 3) Decline not accept offer Cultural in circ 1) Intent to influence 27 Val of threat Customary 4) beh inprop[RITP] Trivial OR 47 Whether ancillary part Register the inducement Inconsequential in a log of professional service  1) Intent Of indiv who exerting 1) Discuss matter windiv who Intimidation pressure exerting pressure to seek t resolv 1) Professional 2) 2) Appoflaws , reg proff Stds Escalating matter win empl compotence to circumstance org : ind when appr , explany conseqrisks to org 3) Culture E leadership of empl 27 Due care 37 Disclose matter in line inc extent reflect wempl org they Org policies Cinclethis, itsa emphasize NB ethical beh & expect. empl act ethically 4) Consult 4] & procedure [if any] that w collegue superior , Policy HR personnel , rel profe reg that has est ethics emplorg < eg : bodies HR policies to address pressure + 40 CODE OF PROFESSIONAL CONDUCT: PART 3: Professional Accountants in Public Practice ET 69 – ET 105 + 47 Professional appointments (320) New Clients Notes: Change in Proff Appointments Concerning Man Integrity : - If say Client is disputed topic - If say is not illegal but... - Controversial involvement Threat(s) Fundamental Evaluate the level of Address the threats: principle(s) threat: Factors Safeguards 17 knowledge understanding of client, owners , I] Suff 1)Self-interest 1) Assign engagem personnel wnec Integrity man those charge w gov a business beh ↳ prof compot. Edue care competencies 2) Professional behaviour 2) client commitment to address questionable 2) issues , eg improving : corp gov practices Agree on realistic time frame for perform of the internal ctris engagement 3) Appropriate understanding of : 3) using experts where nec Nature of clients business complexity of its operations Reg of engagement Purpose, nature a scope of work performed + 48 Second opinions (321) Notes: To an entity existing client might Threat(s) Fundamental Evaluate the level of Address the threats: principle(s) threat: Factors Safeguards 1) w client Obtain info fr Self-Interest 1] Professional 1 circumstances of request permission , existing precessor accountant compotence 2) All other avail facts + assumptions confirm facts relevant to issue to complete relevant to expression of prof judgem 2) Due Care 2) Descr im Surrounding any 2 Opinion in communications w client 3) Provide existing predecessor ACC. w copy of the opinion + 49 Fees and other types of remuneration (330) Notes: ↳ Quoting a lower fee than Other PA's I unethical ↳ If fee so low that in accordance with quoted might be difficult to perform engagement applicable technical professional stds * In Threat(s) Fundamental Evaluate the level of Address the threats: principle(s) threat: Factors Safeguards 1) whether client aware of terms of : 1) 1) Self-interest Adj level of fees scope of 2) Intimidation Basis on which fees det engagement 1) Professional compotence Which professional Services covered 27 Have approap reviewer review 27 work Whether level of fee set by indep 27 Due care 3rd party Eg regulatory : body 3) Extent between ! of dependency lev Of fee for outcome of service 47 Structure compensat Fees Operating arrangem of firm network firms 5) Nature of client : Whether >eg interest client public entity A PA Shall NOT assume custody of clients money O assets UNLESS permitted to do so by law in accw any conditions under which such custody may be taken PA Entrusted Money O assets Self-Interest I professional As part of Client engagement W behaviour acceptance procedures related belonging to others shall : (a) 27 to assuming custody of clients comply wl laws regs relevant Objectivity to holding accounting for Assets money assets a PA shall : (b) keep assets Sep fr personal (a) Make inquiries about source firm assets Of assets (c) Use assets for intended (b) Consider related legal reg purpose obligations (d) Be ready eall times to account for the asset any income , div gains gen to any entity/indiv entitled to that acc + 52 CODE OF PROFESSIONAL CONDUCT: PART 4A ET 106 – ET 187 + 53 Part 4A – Independence for audit and review engagements Independence consist of: Independence in mind – the state of mind that permits the expression of a conclusion without being affected by influences that compromise professional judgment, thereby allowing an individual to act with integrity, and exercise objectivity and professional skepticism. Independence in appearance- The avoidance of facts and circumstance that are so significant that a reasonable informed third party would be likely to conclude that a firm’s or an audit team members integrity, objectivity or professional skepticism has been compromised  compensated for services to audit client When eval selling non-assurance Level of self intrest threat depends on : ~ (a) Prop of compens Firm Shall Noteval Compensate & Rey audit 11 Approap reviewer review based on success in selling work of audit mem eval-based on sale partener non assure of services services to their cient 2) Revise compensation plan (b) Role of indiv on the audit team , eval process for that indiv Requirem does'nt preclude norm profit sharing 3) Remove indiv for aud it team () Whether sale of arrangements between partners of firm non as s services ifluences promotion decisions + 58 Gifts and Hospitality (420) Source: Basis for Conclusions, prepared by the staff of the IESBA 1) Self Interest [] 1) Remove indiv fr audit team 1] Objectivity Materiality of litigation 27 2) Intimidation Integrity 27 Whether 2] Have appropriate reviewer litigation relates to prior audit engagement review work performed + 60 Financial interests (510) Notes: Holding Interest In Audit client Threat(s) Fundamental Evaluate the level of Address the threats: principle(s) threat: Factors Safeguards Self-interest threat to indep 1) Role of indiv holding financial interest 1) Dispose of interest 2) Whether financial int 2) Dispose int so that direct indirect of enough remaining 1) Objectivity 3) of financial interest interest no longer material 27 Integrity Materiality 3) Remove indiv fr audit team 4) Have reviewer review work appropriate Refers to materiality of loan guarantee , to det if material to an indivi the combined networth of indiv their immediate fam mem must be taken into acc SELF INTEREST * Firm , network firm team mem indiv immediate fam shall NOT make loan to client OR , guarented any directors officer of audit client UNLESS immeterial to : (i) Firm network firm indiv making loan guarantee applicable (2) Client director officer of client Shall not accept fr audit client bank or institutions UNLESS made under normal lending procedures , terms & conditions Safeguardi ↳ work reviewed by approac reviewer audit team mem fr a network firm beneficiary of loan guarentee  Materiality of financial interestSignificance of relationship Eg : · Have fin int in jut venture wclient Ctrl owner director officer who perform managerial activities Arrange 1 more of firm network WI of clients market ps · to combo more them 1] Intimidation 17 Elim reduce magnitude 2) self interest 17 Objectivity Oftransaction 2) confidentiality 2) Remove indiv fo team · A firm network team mem indiv immediate fam Shall NOT have B ship involving the holding of int in closely held entity when client director officer of client also holds fin int any go · Purchase of g S doesn't usually create threat to independance if the transaction norm course of Be arms length  0. 3 over clients FP performance CF's Immediate family lempl position Significant to exert influence , Immediate [] : 1) Self Interest Objectivity family indiv fo aud it member I] Remove team 2] I : position held by 2] Familiarity Integrity team. Role 2 of the audit team member 27 restructure resp. So mem 37 Intimidation not deal w matters that are w in the resp of the immediate fam Mem close fam member close Fam 1 : nature of relationship 2 : position held 3 : Role  client > Audit Firm covered Services during period by aud it report incl indiv audit report * Audit team Shall NOT during period covered by # ↳ had served as director officer of audit client position sign if influence ↳ was empl in to exact Prior to period : Prior : Service Prior To Report Having appropriate reviewer 1 Self-interest 1] objectivity 1) position indiv held client review work performed 2) Self review 2) Integrity SINCE left client 2) Length of time 3] Familiarity 3) Role of audit member  of audit client Can't serve as company secretary unless : Practise Specifically permit under local law prof rules practise · , relevant decisions · Management makes all · Duties actu perform lim to routine admin nature 1] Self Review Position of have diff in diff juristictions Secretary implications · 2] Self-Interest · Duties can range fr admin diverse to ensure B comply wreg provide advice on coporate gov matters usually position imply close association wentity · : Treat created if emplof firm network firm for audit client partner serves as company secretary  Audit Firm > client - 1 : self interest ↳ Integrity If position indiv has taken client 17 audit plan modify 2 : Familiarity ↳ objectivity 27 Involvement the indiv will 2) Assign team indiv who have Intimidation havewaud it team relative to signif experience 3 : 3] Length Since indiv was team indiv who joined client mem partner of firm 4) Former position of indivi team 37 Appropriate reviewer 1) Self-Review Shall Not loan personnel to an audit client 1) conduct add review of wrk 2] performed by loan personnel Advocacy unless firm network firm satisfied that : 3) Familiarity (a) Assistance provided ONLY for Short period of 2) Not incl loaned personnel as audit team mem might (b) Personnel NOT assume man respe audit client-resp for directing &address fam advocacy threat supervising actv of personnel (C) indep of firm network drise fr Any threat to prof service undertaken by personnel eliminated Safeguards applied to - threat to applicable level (d) Personnel NOT undertake be involved in prof service of firm/network prohib fr perform by code Need to understand client environment NB to audit qual < 520 mem with : (a) Audit client its operations (b) Audit clientSenior management () FS where firm express ops fin info which forms basis of FS 1) Familiarity In Relation To Indivi 2) change role of indiv on team 2) Self Interest 1) Length of relationship natured extent of tasks 2) Nature freq extent of the 2] Have reviewer who , approap interactions betw indiv Shr Man team review the work In Relation To Audit Client : 3) Perform reg indep internal 1) external quality reviews of Nature , complexity of clients the engagement acc Fin report issues Whether they have changed 27 Whether been recent any in Senior man charged w gov Assurance Auditor express Opinion enhance of confidence degree Non Assurance No Opinion expressed & consequently no assurance is provided 1) Nature , =] use indiv audit team mem 1] Self-Interest scope intended use + purpose of service to perform service 2] Familiarity 27 Manner in which Service will 27 Have appropreviewer who 3) self-review be provided 'Eg personnel to be NOT involved in providing service involvedtheir locations review the audit work service 3)Extent to which client det. performed significant matters of judgem. 37 Obtain pre clearance of the 4) outcome of the service from Degree of reliance placed on Outcome of audit appropriate authority 57 Fee relating to provision of the non-assurance  Financial Reporting Framework Responsibilities S Det acc policies treatm in accordance those policies ·. w Prep of data in electronic o form evidencing occurance of · source docs , transact Originating Changing Jul entries · · Det approve acc classification of transactions Self Interest Don't if : IJ use professionals team perform ac bookkeeping services Exceptions for Drive company data mem to perform Service services routine machanical nature (payroll reports base client · 2] reviewer Firm address threats created by provide service-acceptable level Appropriate · any involved in service , depreciation on Exc assets where client det. acc policy of 47 Res val. providing review audit work service Public Interest Entity Exemption performed · Statutory FS for related entity of public interest entity audit client Assist clients W their routine mechanical tasks w/in nor m course of ops : Word service processing · · Prep admin Statutory forms for client approval · & Monitor Statutory filing dates advising client of those dates · Make assumptions w. r. t. future dev , application of approp methods techq & combo for to compute certain val range of val an A L whole part entity Assist wtax report oblg/planning & results of valuation effect on acc · records FS O than accentries related to tax 1] Self review 1) use I purpose of val. report 27 whether val report public 2] Advocacy 3) Extent val method. support by law reg Oprecedent Shall NOT provide val to client who e st practise public entity if 4) I of subjectivity : Degree (a) val involve of inherent in the item for vals. significant degree subjectivity involve stud/est methods (b) Val have material effect on F5 on which firm will express an opinion  Prep Tax advisory return ↳ ↳Tax ↳ Tax planning ↳ Tax service that involve valuations ↳Tax calcs for purpose of prep accentries ↳ Assistance in resolution of tax disputes 1] Self Review 1) Particular 1J use prof who not part of characteristics of the audit team 2) engagement Advocacy 2] Appropriate reviewer involv 2) Level of of in prov service review tax expertise 3) Obtain clearance from clients employees pre tax authorities 3) Sys by which tax authority assess &administer tax quest. & role of firm in that process ↳ Monitor internal Ctrls'review Ctrls , monitor ops & recommend improvements ↳ Examine Financial operating info ↳ Review eco , eff effectiveness of operating actu find non-financial ] ↳ Review compliance laws &O external req w , reg 1) 1) Self-Review Materiality of related FS For threat created by provision 2] 2) Risk of misstatement of Of Internal Audit to client assertions related to Famts Public entity 17 use professionals mem 3) Degree of reliance that the team will place on the work the internal audit service + The South African Institute of Chartered Accountants (SAICA) Constitution https://www.saica.co.za/About/Constitution/tabid/1732/language/en- ZA/Default.aspx + 85 SAICA –By-Laws Appendix 4 Persons and committees responsible Disciplinary Process responsibilities Designated Disciplinary Officer (2.10.12) DC = Disciplinary Committee PCC = Professional Conduct Committee Refer to disciplinary process diagram Important! When looking at Appendix 4, the word “code” refers to the Disciplinary Code and Procedures as contained in Appendix 4 and not the Code of Professional Conduct (2.10.3)  ↑ UniSha.DIe CORC4Ct.. 4.1. 17 contravenes CA Designation Act 67 of 1933 4. 1. 27 pays commission to someone in public practise 4. 1. 3) Accepting commission w out clients consent 4 4). 1 Improperly Obtaining attempting to Obtain work. 4. 1 5. Soliciting advertising can vasing for work in a manner NOT Permitted by CPC 1 6) 4. Unlawfully failing to account for any money property rec for on behalf. of client any person 4 1 7. Failing to comply w ANY reg by law CPC. , 4.1 8 Impose restraint on trainee accountant after contract. training 9] training contract of trained accountant 4. 1 Rec to cancel. paym 4.1. 10] Fails to resigns if asked to 4. 1 117 Fails to to SAICA , Subscription any levies o charge payable pay money. , 4 2. contravene Auditing Profession Act 26 of 2005 regulations of IRBA 4. 2. 4 2.. 2] 4 2 3.. Certifying reporting on any accounts , statements reports w out taking steps to ensure correctness 2 4 Refuse to By Laws 4.. comply w 4 2 5.. commiting breach of ANY rule provision of CPC 4. 2. 6) Bring profession into disrepute 4. 2. 7] Fails to comply W corresp fr SAICA 4. 2. 8) Fails to comply worder , req request fr SAICA 4. 3) Punishable conduct of mem PunishableConduct of Trained  SELF STUDY + 93 SAICA By-Laws Appendix 4 Record and Publication of Findings and Decisions (part 18) All findings and decisions of the PCC and DC shall take effect when made and shall be reported to the Board (18.1) Offences published to SAICA website, in member communications or in Accountancy SA magazine: Name of respondent Description of offence Penalty imposed