Professional and Ethical Responsibilities - SAICA CPC

The Professional and Ethical Responsibilities Lesson 1  Lesson 1 Ethics Personal ethics Business ethics Professional ethics...

The Professional and Ethical Responsibilities Lesson 1  Lesson 1 Ethics Personal ethics Business ethics Professional ethics The ethical principles and The fundamental ethical Personal value system values principles and values applied by the applied by a professional applied by an individual to organisations to CA/RA to decision-making decision-making decision-making conduct; and conduct; and conduct; and the interaction the relationship the relationship between the organization, between the professional, between the self and its stakeholders and its stakeholders and others society society https://www.saica.org.za/about/general/ethics/cpd-ethics-reflection-resources 2 Lesson 1 Lesson 4 Lesson 3 Lesson 5 Lesson 2 Lesson 6 Lesson 1 Lesson 5 Lesson 4  Lesson 1 SAICA members: Markus Jooste https://www.saica.org.za/news/saica-announces-disciplinary-proceedings-against-mr-markus-jooste 5  Lesson 1 SAICA members: Markus Jooste https://www.saica.org.za/news/saica-announces-disciplinary-proceedings-against-mr-markus-jooste 6  Lesson 1 Trainee Accountants? Trainee accountants also expected to maintain a standard of ethical behaviour SAICA seeks to impress upon its trainee accountants that the Code of Professional Conduct and SAICA by- laws, read with the relevant regulations and policies, are also applicable to SAICA trainees and that where unethical conduct occurs, such conduct may render a trainee no longer fit and proper to continue with their SAICA training contract or not fit and proper to be allowed to enter into a new SAICA training contract. Even where trainees are found to be fit and proper after being found guilty of unethical conduct, penalty periods will be added to the training contracts to extend the duration of these contracts as an appropriate sanction for the unethical conduct. This must be seen within the broader context of SAICA’s responsibility to protect the public interest. Similarly, trainee accountants should also see themselves as called upon to uphold the reputation and ethical standards of the profession of accountancy. Accordingly, trainees are also in a position to report unethical conduct within their training offices to the SAICA Legal and Discipline Unit or to the SAICA Training Unit https://www.accountancysa.org.za/answering-the-call-to-ethical-behaviour/ 7 Lesson 2 Lesson 2 IRBA’s Rules of Improper Conduct Non-exhaustive list of acts or omissions considered punishable conduct “Section 2 of the IRBA Rules Regarding Improper Conduct (2019)” 9  Lesson 2 IRBA’s Rules of Improper Conduct 2. A registered auditor or a registered candidate auditor shall be guilty of improper conduct if such registered auditor or registered candidate auditor, without reasonable cause or excuse: 1. Contravenes or fails to comply with any provision of the Act with which it is the registered auditor’s or registered candidate auditor’s duty to comply. 2. Contravenes or fails to comply with any provision of any other Act with which it is the registered auditor’s or registered candidate auditor’s duty to comply in providing professional services. 3. Has been found guilty in some other forum, including a court, of any offence involving dishonesty and, in particular (but without prejudice to the generality of the foregoing), theft, fraud, forgery or uttering a forged document, perjury, or corruption. 4. Is dishonest in the performance of any work or duties devolving upon the registered auditor or registered candidate auditor in relation to – 1. Any professional services performed by a registered auditor or a registered candidate auditor; or 2. Any office of trust which the registered auditor or registered candidate auditor has undertaken or accepted. 5. Contravenes or fails to comply with any requirement in Auditing Pronouncements prescribed by the Regulatory Board. Section 2 of the IRBA Rules Regarding Improper Conduct (2019) 10  Lesson 2 IRBA’s Rules of Improper Conduct 6. Contravenes or fails to comply with any requirements in the Code. 7. Fails to perform any professional services or duties with such a degree of professional competence, due care and skill as in the opinion of the Regulatory Board may reasonably be expected, or fails to perform the professional services or duties at all. 8. With intent to evade or to assist any other person to evade any tax, duty, levy or rate whatsoever – 1. knowingly or recklessly prepares or makes, or assists any other person to prepare or make, any false statement (whether such statement be oral or in writing); or 2. signs any false statement in relation thereto recklessly or knowing it to be false; or 3. knowingly or recklessly prepares or maintains any false books of accounts or other records. 9. Fails to answer to or deal with, appropriately and within a reasonable time, any correspondence or other communication from the Regulatory Board or any other person which reasonably requires a reply or other response. 10. Fails to comply within a reasonable time with an order, requirement or request of the Regulatory Board. Section 2 of the IRBA Rules Regarding Improper Conduct (2019) 11  Lesson 2 IRBA’s Rules of Improper Conduct 11. Fails to resign from a professional appointment when requested by the client to do so and/or fails to transfer all books and papers that are the property of the client and which are or which may come into the registered auditor’s or registered candidate auditor’s possession to the client or to a newly appointed accountant or registered auditor when requested by the client to do so. 12. Fails after demand to pay any subscription or any fee, levy, fine or other charge payable or due to the Regulatory Board. 13. Abandons the registered auditor’s public practice without previous notice to the registered auditor’s clients and without arranging with the clients for the dispatch of the clients’ business or the care of the clients’ property in the registered auditor’s possession or under the registered auditor’s control. 14. Knowingly or recklessly makes any false declaration or submission. 15. Makes any declaration or submission which the registered auditor or registered candidate auditor ought reasonably to have known is false. 16. Behaves in a manner which brings or may bring the auditing profession into disrepute. Section 2 of the IRBA Rules Regarding Improper Conduct (2019) 12 Lesson 3  Lesson 3 SAICA’s By-Laws Non-exhaustive list of what would be considered punishable conduct, Including conduct which is: discreditable, dishonourable, dishonest, irregular or unworthy, or derogatory to the Institute or tends to bring the profession of accountancy into disrepute. “Section 4 of Appendix 4: Disciplinary Codes and Procedures of the SAICA By-Laws as approved by the Board on 2 May 2023” https://www.accountancysa.org.za/answering-the-call-to-ethical-behaviour/ 14  Lesson 3 SAICA’s By-Laws Offence Misconduct https://www.accountancysa.org.za/answering-the-call-to-ethical-behaviour/ 15  Lesson 3 SAICA’s By-Laws 1. The following offences whether of commission or of omission, upon the part of any person who is or was a Chartered Accountant at the time of the commission of the alleged offence shall constitute Punishable Conduct and such Member or former Member admitting to his/her guilt or found guilty thereof as provided in the Code shall be liable to the penalties prescribed in the Code: 1. contravening any of the provisions of the Chartered Accountant’s (Private) Designation Act, 67 of 1993 (“the Designation Act”); 2. directly or indirectly paying a person, other than a Member in public practice or any person practising as an accountant or auditor outside the Republic, a commission, or giving such person monetary or other consideration, as remuneration for bringing the Member work, or for inducing other persons to give work to the Member; 3. accepting directly or indirectly any commission, brokerage or other remuneration in respect of professional or commercial business referred to others as an incident to his or her service to any client, except with the knowledge and consent of that client; 4. improperly obtaining or attempting to obtain work; 5. soliciting or advertising or canvassing in the Republic (or in any territory outside the Republic designated by the Board from time to time) in any manner not permitted by the Rules or Code of Professional Conduct; Section 4 of Appendix 4: Disciplinary Codes and Procedures of the SAICA By-Laws as approved by the Board on 2 May 2023 16  Lesson 3 SAICA’s By-Laws 6. unlawfully failing to account for, or unreasonably delaying an accounting for, any money or property received for or on behalf of a client or any other person when called upon to do so; 7. failing to comply with any regulation, By-law or Code of Professional Conduct; 8. seeking, either before or during the period of training of a Trainee Accountant, to impose any restraint whatever on the Trainee Accountant concerned, which will apply after the date of the termination of the training period, or threatening, or attempting to enforce, any such restraints after such date; 9. directly or indirectly stipulating for or receiving from a Trainee Accountant who is or has been serving under a training contract, or from any other person, any payment, reward, compensation or consideration for agreeing to the cancellation of such training contract: provided that it shall not be deemed a breach of this By-law if a Member, or former Member requires to be or is reimbursed in respect of disbursements actually made by him or her to the Institute in connection with a training contract which is subsequently cancelled and of which disbursements he or she is able to produce proof to the satisfaction of the Institute; 10. without reasonable cause failing to resign from a professional appointment when requested by the client to do so; and/or 11. failing after demand to pay any subscription or any fee, levy or other charge payable to the Institute. Section 4 of Appendix 4: Disciplinary Codes and Procedures of the SAICA By-Laws as approved by the Board on 2 May 2023 17  Lesson 3 SAICA’s By-Laws 2. The following misconduct whether of commission or of omission, upon the part of any person who is or was a Chartered Accountant at the time of the commission of the alleged misconduct shall constitute Punishable Conduct and such Member or former Member admitting to his/her guilt or found guilty thereof as provided in the Code shall be liable to the penalties prescribed in the Code: 1. contravening any of the provisions of sections 44, 52, 53 or 54 of the Auditing Profession Act, 26 of 2005 (“APA”), or any amendment or replacement thereof, or contravening any rules or regulations created by the IRBA from time to time under the power granted to it in terms of section 10 of the APA, or any amendment or replacement thereof, or, in the case of a Member or former Member who is not registered with the IRBA, conducting himself or herself in a manner which would amount to a contravention of the foregoing if he or she were so registered, or obtaining registration under section 37 of the APA by fraudulent or irregular means; 2. conducting himself or herself with gross negligence in connection with any work performed by him or her in his or her profession or employment, including (without limitation) work or employment in connection with secretaryships, trusteeships, liquidations, judicial managements, business rescue, executorships, administratorships or curatorship’s, or any office of trust which he or she has undertaken or accepted; 3. certifying or reporting on any accounts, statements, reports or other documents, without taking reasonable steps to ensure the correctness of such certificate or report; Section 4 of Appendix 4: Disciplinary Codes and Procedures of the SAICA By-Laws as approved by the Board on 2 May 2023 18  Lesson 3 SAICA’s By-Laws 4. wilfully refusing or failing to perform or conform with any of the provisions of these By-laws which it is his or her duty to perform or with which it is his or her duty to conform; 5. committing a breach of any rule or any provision of the Code of Professional Conduct prescribed by the Board from time to time in terms of By-law 20 or, after having been previously warned by the Board or any committee appointed by it, continuing to commit a breach of such rules or Code of Professional Conduct; 6. conducting himself or herself in a manner which, in the opinion of the PCC or the DC, is discreditable, dishonourable, dishonest, irregular or unworthy, or which is derogatory to the Institute, or tends to bring the profession of accountancy into disrepute; 7. failing to answer or deal with appropriately within a reasonable time any correspondence or other communication from the Institute or any other person which reasonably requires a reply or other response; 8. failing to comply with an order, requirement or request from the Institute on or before the stipulated date and/or any further extension period granted; and/or failing to notify SAICA of his/her provisional sequestration or final sequestration. 3. Punishable Conduct on the part of a Trainee Accountant shall include any conduct which would amount to Punishable Conduct had it been perpetrated by a Member, Associate General Accountant or Accounting Technician. Section 4 of Appendix 4: Disciplinary Codes and Procedures of the SAICA By-Laws as approved by the Board on 2 May 2023 19 Lesson 4 Lesson 5 Lesson 5 SAICA CPC Sets out the fundamental principles of ethics for professional accountants 1 - Reflects the profession’s recognition of its public interest responsibility - Standard of behaviour expected of a professional accountant Provides a conceptual framework that professional accountants are to apply to 2 identify, evaluate and address threats to the fundamental principles For audits, reviews and other assurance engagements: 3 - Independence standards (applying the conceptual framework to threats to independence) 22 Lesson 5 SAICA CPC 23  Lesson 5 Professional Accountant Chartered Accountant / Associate Professional Accountant in Professional Accountant in public practice business PA working in commerce, industry, PA in a firm that provides professional services to service public sector, education, not- clients for-profit sector, regulatory or Audit, review, other assurance and related Part 1, 3 and professional body services (ASSURANCE) 4A / 4B Employee, contractor, partner, director Accounting services (executive / non-executive) owner- Company secretarial services manager or volunteer Taxation services Part 1, 2 and Management consulting and advisory services Internal audit, risk and compliance 4A / 4B ↓ Part 1 and 2 IT advisory Forensic services 24  Lesson 5 Assurance Engagement in which a PA in public practice as to obtain sufficient appropriate audit evidence in order to express a conclusion designed to enhance the degree of confidence about the subject matter Performed by: Engagement Partner and Engagement Team Engagement period: From: when the team begins to perform the audit / review To: when the audit report is issued / if recurring nature, later of when the audit report is issued or notification by either party that the professional relationship has ended Assurance engagements other than audit and review Audit and Review engagements Audit Assurance on an entity’s key performance indicators Statutory Audit Assurance on an entity’s compliance with law or regulations Review Assurance on performance areas Assurance on the effectiveness of an entity’s system of internal control ↓ ↓ Part 1, 3 and 4A Part 1, 3 and 4B 25 Public Interest Entity Lesson 5 26 Public Interest Entity Lesson 5 27 Lesson 5 SAICA CPC 28 Approach for a professional accountants to identify, evaluate and address threats to the fundamental principles to meet their responsibility to act in the public interest Lesson 5 Lesson 5  Have an enquiring mind Lesson 5 Prerequisite to obtaining an understanding of known facts and circumstances necessary for the proper application of the conceptual framework Involves: 1. Considering the source, relevance and sufficiency of information obtained, taking into account the nature, scope and outputs for the professional activity being undertaken. Consider New information that has emerged or changes in facts and circumstances Information or its source might be influenced by bias or self interest Reason why information might be missing from the facts and circumstances Inconsistency between the known facts and circumstances and the PA’s expectations Auditing, review and other assurance standards – also professional skepticism 2. Being open and alert to a need for further investigation or action. 31 Lesson 5  Professional Judgement and Professional Skepticism Lesson 5 Professional Judgement Professional Skepticism The application of relevant training, knowledge An attitude that includes a questioning and experience, within the context provided by mind, being alert to conditions which may assurance, auditing, accounting and ethical indicate possible misstatement due to standards, in making informed decisions error or fraud, and a critical assessment of about the courses of action that are evidence. appropriate in the circumstances of the engagement. Compliance with the fundamental principles, individually and collectively, supports the Required when the PA applies the conceptual exercise of professional skepticism framework in order To make informed decisions about courses of actions available; and To determine whether such decisions are appropriate in the circumstances 33 Lesson 5  Bias Lesson 5 Lack of neutrality Affects the exercise of professional judgement / professional skepticism Actions to mitigate the effect of bias: Seeking advice from experts to obtain additional input Consulting with other to ensure appropriate challenge as part of the evaluation process Receiving training related to the identification of bias as part of professional development. 35 Lesson 5  Reasonable and informed third party test Lesson 5 The reasonable and informed third party test is a consideration by the PA about whether the same conclusions would likely to be reached by another party Such consideration is made from the perspective of a reasonable and informed third party who weights all the relevant and facts and circumstances that the accountant know at the time that the conclusions are made. The reasonable and informed third party does not need to be a PA, but would possess the relevant knowledge and experience to understand and evaluate the appropriateness of the accountant’s conclusions in an impartial manner. 37 Lesson 5  Fundamental principles and threats Lesson 5 Fundamental principles Threats Integrity Self-interest threat Objectivity Self-review threat Professional Competence and Due Care Advocacy threat Confidentiality Familiarity threat Professional Behaviour Intimidation threat 39 Lesson 5  Independence Lesson 5 Not a fundamental principle – linked to integrity and objectivity Same threats apply Requirement for professional accountants in public practice providing assurance services Independence comprises: 1) Independence of mind State of mind that permits the expression of a conclusion without being affected by influences that compromise professional judgement, thereby allowing an individual to act with integrity and exercise objectivity and professional skepticism 2) Independence in appearance The avoidance of facts and circumstances that are so significant that a reasonable and informed third party would be likely to conclude that a firm’s or an auditor or assurance team member’s integrity, objectivity or professional skepticism has been compromised. 41 Lesson 5  Evaluate the threat identified Lesson 5 Qualitative factors Quantitative factors Combination 43 Lesson 5 Acceptable level Lesson 5 Level at which a PA using the reasonable and informed third party test would likely conclude that the PA complies with the fundamental principles 45 Lesson 5 Lesson 5  Evaluate the threat identified Lesson 5 Qualitative factors Quantitative factors Combination 48  Lesson 5 Safeguards: Actions, individually or in combination that the PA takes to effectively reduce the threat to compliance with the fundamental principles to an acceptable level 49 Lesson 5 Lesson 5 Approach for a professional accountants to identify, evaluate and address threats to the fundamental principles to meet their responsibility to act in the public interest Lesson 5 Lesson 5 SAICA CPC 53  Fundamental principles and threats Lesson 5 Fundamental Principles Threats Integrity Self-interest threat Objectivity Self-review threat Professional Competence and Due Care Advocacy threat Confidentiality Familiarity threat Professional Behaviour Intimidation threat 54  Fundamental principles and threats Lesson 5 Fundamental Principles Threats Integrity Self-interest threat Objectivity Self-review threat Professional Competence and Due Care Advocacy threat Confidentiality Familiarity threat Professional Behaviour Intimidation threat 55 Lesson 5 Fundamental Principles Sets out the fundamental principles of ethics for professional accountants 1 - Reflects the profession’s recognition of its public interest responsibility - Standard of behaviour expected of a professional accountant 3 56 Fundamental Principle - Integrity Lesson 5 “ to be straightforward and honest in all professional and business relationships ” 57  Fundamental Principle - Integrity Lesson 5 Integrity involves - fair dealing, - truthfulness, and - having the strength of character to act appropriately, even when facing pressure to do otherwise or when doing so might create potential adverse personal or organisational consequences. Acting appropriately involves: a) Standing one’s ground when confronted by dilemmas and difficult situations; or b) Challenging others as and when circumstances warrant, in a manner appropriate to the circumstances. 58  Fundamental Principle - Integrity Lesson 5 A professional accountant shall not knowingly be associated with reports, returns, communications or other information where the professional accountant believes that the information: a) Contains a materially false or misleading statement; or b) Contains statements or information provided recklessly; or c) Omits or obscures required information where such omission or obscurity would be misleading. 59  Fundamental Principle - Objectivity Lesson 5 “ to exercise professional or business judgement without being compromised by: (i) bias; (ii) conflict of interest; or (iii) undue influence of, or undue reliance on, individuals, organisations, technology or other factors ” 60  Fundamental Principle - Objectivity Lesson 5 A professional accountant shall not undertake a professional activity if a circumstance or relationship unduly influences the professional accountant’s professional judgement regarding that activity. Professional Judgement The application of relevant training, knowledge and experience, within the context provided by assurance, auditing, accounting and ethical standards, in making informed decisions about the courses of action that are appropriate in the circumstances of the engagement. 61  Fundamental Principle - Professional Competence and Lesson 5 Due Care To “ (i) attain and maintain professional knowledge and skill at the level required to ensure that a client or employing organisation receives competent professional service, based on current technical and professional standards and relevant legislation; and (ii) act diligently and in accordance with applicable technical and professional standards ” 62  Fundamental Principle - Professional Competence and Lesson 5 Due Care “attain and maintain professional knowledge and skill at the level required to ensure that a client or employing organisation receives competent professional service, based on current technical and professional standards and relevant legislation” Serving clients and employing organisations with professional competence requires the exercise of sound judgement in applying professional knowledge and skill when undertaking professional activities. Maintaining professional competence requires a continuing awareness and an understanding of relevant technical, professional and business developments. Continuing professional development enables a professional accountant to develop and maintain the capabilities to perform competently within the professional environment. “act diligently and in accordance with applicable technical and professional standards” Diligence encompasses the responsibility to act in accordance with the requirements of an assignment, carefully, thoroughly and on a timely basis. 63  Fundamental Principle - Professional Competence and Lesson 5 Due Care In complying with the principle of professional competence and due care, a professional accountant shall take reasonable steps to ensure that those working in a professional capacity under the professional accountant’s authority have appropriate training and supervision. Where appropriate, a professional accountant shall make clients, the employing organisation, or other users of the professional accountant’s professional services or activities, aware of the limitations inherent in the services or activities. A professional accountant shall not undertake or continue with any engagement that the professional accountant is not competent to perform, unless the professional accountant obtains advice and assistance which enables the professional accountant to carry out the engagement satisfactorily. 64 Fundamental Principle - Confidentiality Lesson 5 “ to respect the confidentiality of information acquired as a result of professional and business relationships ” 65  Fundamental Principle - Confidentiality Lesson 5 A Professional Accountant shall: Be alert to the possibility of inadvertent disclosure, including in a social environment, and particularly to a close business associate or an immediate or a close family member; Maintain confidentiality of information within the firm or employing organisation; Maintain confidentiality of information disclosed by a prospective client or employing organisation; Not disclose confidential information acquired as a result of professional and business relationships outside the firm or employing organisation without proper and specific authority, unless there is a legal or professional duty or right to disclose; Not use confidential information acquired as a result of professional and business relationships for the personal advantage of the professional accountant or for the advantage of a third party; Not use or disclose any confidential information, either acquired or received as a result of a professional or business relationship, after that relationship has ended; and Take reasonable steps to ensure that personnel under the professional accountant’s control, and individuals from whom advice and assistance are obtained, respect the professional accountant’s duty of confidentiality. 66  Fundamental Principle - Confidentiality Lesson 5 Confidentiality serves the public interest because it facilitates the free flow of information from the professional accountant’s client or employing organisation to the professional accountant in the knowledge that the information will not be disclosed to a third party. Nevertheless, the following are circumstances where professional accountants are or might be required to disclose confidential information or when such disclosure might be appropriate: (a) Disclosure is required by law, for example: i. Production of documents or other provision of evidence in the course of legal proceedings; or ii. Disclosure to the appropriate public authorities of infringements of the law that come to light; including disclosures of reportable irregularities reported to the Regulatory Board as required by section 45 of the Act; (b) Disclosure is permitted by law and is authorised by the client or the employing organisation; and (c) There is a professional duty or right to disclose, when not prohibited by law: i. To comply with the quality review of the Regulatory Board or the Institute; ii. To respond to an inquiry or investigation by the Institute, the Regulatory Board and any other regulatory body; iii. To protect the professional interests of a professional accountant in legal proceedings; or iv. To comply with technical and professional standards, including ethics requirements. 67  Fundamental Principle - Confidentiality Lesson 5 In deciding whether to disclose confidential information, factors to consider, depending on the circumstances, include: Whether the interests of any parties, including third parties whose interests might be affected, could be harmed if the client or employing organisation consents to the disclosure of information by the professional accountant. Whether all the relevant information is known and substantiated, to the extent practicable. Factors affecting the decision to disclose include: - Unsubstantiated facts - Incomplete information - Unsubstantiated conclusions. The proposed type of communication, and to whom it is addressed. Whether the parties to whom the communication is addressed are appropriate recipients. 68  Fundamental Principle - Confidentiality Lesson 5 A professional accountant shall continue to comply with the principle of confidentiality even after the end of the relationship between the professional accountant and a client or employing organisation. When changing employment or acquiring a new client, the professional accountant is entitled to use prior experience but shall not use or disclose any confidential information acquired or received as a result of a professional or business relationship. 69  Fundamental Principle – Professional Behaviour Lesson 5 To “ (i) comply with relevant laws and regulations; (ii) behave in a manner consistent with the profession’s responsibility to act in the public interest in all professional activities and business relationships; and (iii) Avoid any conduct that the professional accountant knows or should know might discredit the profession ” 70  Fundamental Principle - Professional Behaviour Lesson 5 A professional accountant shall not knowingly engage in any business, occupation or activity that impairs or might impair the integrity, objectivity or good reputation of the profession, and as a result would be incompatible with the fundamental principles. Conduct that might discredit the profession includes conduct that a reasonable and informed third party would be likely to conclude adversely affects the good reputation of the profession. The reasonable and informed third party does not need to be a PA, but would possess the relevant knowledge and experience to understand and evaluate the appropriateness of the accountant’s conclusions in an impartial manner. 71  Fundamental Principle - Professional Behaviour Lesson 5 When undertaking marketing or promotional activities, a professional accountant shall not bring the profession into disrepute. A professional accountant shall be honest and truthful and shall not make: a) Exaggerated claims for the services offered by, or the qualifications or experience of, the professional accountant; or b) Disparaging references or unsubstantiated comparisons to the work of others. If a professional accountant is in doubt about whether a form of advertising or marketing is appropriate, the professional accountant is encouraged to consult with the Institute. 72  Fundamental principles and threats Lesson 5 Fundamental Principles Threats Integrity Self-interest threat Objectivity Self-review threat Professional Competence and Due Care Advocacy threat Confidentiality Familiarity threat Professional Behaviour Intimidation threat 73  Fundamental principles and threats Lesson 5 Fundamental Principles Threats Integrity Self-interest threat Objectivity Self-review threat Professional Competence and Due Care Advocacy threat Confidentiality Familiarity threat Professional Behaviour Intimidation threat 74 Approach for a professional accountants to identify, evaluate and address threats to the fundamental principles to meet their responsibility to act in the public interest Lesson 5 Threats – Self-interest threat Lesson 5 “ the threat that a financial or other interest will inappropriately influence a professional accountant’s judgement or behaviour ” 76  Threats – Self-interest threat Lesson 5 Professional Accountant in Business Professional Accountant in Public Practice A professional accountant holding a financial A professional accountant having a direct financial interest in a client. interest in, or receiving a loan or guarantee A professional accountant quoting a low fee to obtain a from, the employing organisation. new engagement and the fee is so low that it might be difficult to perform the professional service in accordance A professional accountant participating in with applicable technical and professional standards for incentive compensation arrangements that price. offered by the employing organisation. A professional accountant having a close business relationship with a client. A professional accountant having access to A professional accountant having access to confidential corporate assets for personal use. information that might be used for personal gain. A professional accountant discovering a significant error A professional accountant being offered a when evaluating the results of a previous professional gift or special treatment from a supplier of service performed by a member of the professional accountant’s firm. the employing organisation. 77  Threats – Self-review threat Lesson 5 “ the threat that a professional accountant will not appropriately evaluate the results of a previous judgement made; or an activity performed by the professional accountant, or by another individual within the professional accountant’s firm or employing organisation, on which the professional accountant will rely when forming a judgement as part of performing a current activity ” 78  Threats – Self-review threat Lesson 5 Professional Accountant in Business Professional Accountant in Public Practice A professional accountant determining the A professional accountant issuing an appropriate accounting treatment for a assurance report on the effectiveness of the business combination after performing the operation of financial systems after feasibility study supporting the purchase implementing the systems. decision. A professional accountant having prepared the original data used to generate records that are the subject matter of the assurance engagement. 79 Threats – Advocacy threat Lesson 5 “ the threat that a professional accountant will promote a client’s or employing organisation’s position to the point that the professional accountant’s objectivity is compromised ” 80  Threats – Advocacy threat Lesson 5 Professional Accountant in Business Professional Accountant in Public Practice A professional accountant having the A professional accountant promoting the opportunity to manipulate information in a interests of, or shares in, a client. prospectus in order to obtain favourable A professional accountant acting as an financing advocate on behalf of a client in litigation or disputes with third parties. A professional accountant lobbying in favour of legislation on behalf of a client 81 Threats – Familiarity threat Lesson 5 “ the threat that, due to a long or close relationship with a client, or employing organisation, a professional accountant will be too sympathetic to their interests or too accepting of their work ” 82  Threats – Familiarity threat Lesson 5 Professional Accountant in Business Professional Accountant in Public Practice A professional accountant being responsible A professional accountant having a close or for the financial reporting of the employing immediate family member who is a director or organisation when an immediate or close officer of the client. family member employed by the organisation A director or officer of the client, or an employee in makes decisions that affect the financial a position to exert significant influence over the subject matter of the engagement, having recently reporting of the organisation. served as the engagement partner. A professional accountant having a long An audit team member having a long association association with individuals influencing with the audit client. business decisions. An individual who is being considered to serve as an appropriate reviewer, as a safeguard to address a threat, having a close relationship with an individual who performed the work. 83 Threats – Intimidation threat Lesson 5 “ the threat that a professional accountant will be deterred from acting objectively because of actual or perceived pressures, including attempts to exercise undue influence over the professional accountant ” 84  Threats – Intimidation threat Lesson 5 Professional Accountant in Business Professional Accountant in Public Practice A professional accountant or immediate or A professional accountant being threatened with close family member facing the threat of dismissal from a client engagement or the firm because of a disagreement about a professional dismissal or replacement over a disagreement matter. about: A professional accountant feeling pressured to o The application of an accounting principle. agree with the judgement of a client because the client has more expertise on the matter in o The way in which financial information is to question. be reported. A professional accountant being informed that a An individual attempting to influence the planned promotion will not occur unless the decision-making process of the professional professional accountant agrees with an inappropriate accounting treatment. accountant, for example with regard to the A professional accountant having accepted a awarding of contracts or the application of an significant gift from a client and being threatened accounting principle. that acceptance of this gift will be made public. 85 Lesson 5 SAICA CPC 86 Lesson 5 SAICA CPC 87  SAICA CPC Lesson 5 Lesson 6 Activity 3 Lesson 6 Advertisement Lesson 3 “Soliciting or advertising or canvassing in the Republic (or in any territory outside the Republic designated by the Board from time to time) in any manner not permitted by the Rules or Code of Professional Conduct” Section 4 of Appendix 4: Disciplinary Codes and Procedures of the SAICA By-Laws as approved by the Board on 2 May 2023 Lesson 5 CPC 89 Financial Interest Lesson 5 Professional Accountant in Business Professional Accountant in Public Practice Objectivity? 90 Inducements Lesson 5 Inducements Lesson 5 Inducements Prohibited by Not prohibited law by law Intent to improperly influence No intent to improperly influence Inducements Lesson 5 Commission Lesson 3 “directly or indirectly paying a person, other than a Member in public practice or any person practising as an accountant or auditor outside the Republic, a commission, or giving such person monetary or other consideration, as remuneration for bringing the Member work, or for inducing other persons to give work to the Member; accepting directly or indirectly any commission, brokerage or other remuneration in respect of professional or commercial business referred to others as an incident to his or her service to any client, except with the knowledge and consent of that client;” Section 4 of Appendix 4: Disciplinary Codes and Procedures of the SAICA By-Laws as approved by the Board on 2 May 2023 94 Fees Lesson 5 Total fees – Referral or commissions Fees Lesson 5 Audit fees Low balling Fees Lesson 5 Audit fees Fees Lesson 5 Audit fees Fees Lesson 5 Audit fees Fees Lesson 5 Total fees – Fee dependency Fees Lesson 5 Total fees – Fee dependency Fees Lesson 5 Total fees – Fee dependency Lesson 5 Lesson 5 Lesson 5 Fees Lesson 5 Total fees - Proportion Fees Lesson 5 Total fees – Overdue fees Fees Lesson 5 Contingent fees Fees Lesson 5 Contingent fees Fees Lesson 5 Contingent fees Fees Lesson 5 Contingent fees Audit Preparation of or amendment of tax return Other non-assurance Long association with a client Lesson 5 Long association with a client Lesson 5 Objectivity? Assurance and taxation services Lesson 5 a) Tax return and submission b) Tax calculation for the purposes of preparing financial entries c) Tax planning and other tax advisory services d) Tax services involving valuations e) Assistance in the resolution of tax disputes 114  Lesson 5 Assurance and taxation services  Lesson 5 Assurance and taxation services a) Tax return and submission  Lesson 5 Assurance and taxation services b) Tax calculation for the purposes of preparing financial entries Assurance and taxation services Lesson 5 b) Tax calculation for the purposes of preparing financial entries 118 Assurance and taxation services Lesson 5 c) Tax planning and other tax advisory services 119 Assurance and taxation services Lesson 5 c) Tax planning and other tax advisory services 120 Assurance and Internal Audit services Lesson 5 c) Tax planning and other tax advisory services 121 Assurance and Internal Audit services Lesson 5 Assurance and Internal Audit services Lesson 5 Assurance and Internal Audit services Lesson 5 Assurance and Internal Audit services Lesson 5 Assurance and Internal Audit services Lesson 5 Lesson 5 SAICA CPC 127 Lesson 1 Lesson 4 Lesson 3 Lesson 5 Lesson 2 Lesson 6