Download - Professional and Ethical Consideration-final
PROFESSIONAL AND ETHICAL CONSIDERATION
PART 1 : BY-LAWS ON PROFESSIONAL ETHICS
PART C : PROFESSIONAL ACCOUNTANTS IN BUSINESS
SECTION 300 - INTRODUCTION
Describes the conceptual framework contained in Part A – to be applied by professional accountants (PA) in business.This part not describes all of the circumstances and relationships that could be encountered by PA in business that create or may create threats to comply with the fundamental principles.
PA is encouraged to be alert for such circumstances and relationships.
SECTION 300 - INTRODUCTION
WHO?
Investors
CreditorsEmployers
Governments
Public
SECTION 300 - INTRODUCTION
Salaried employee
Partner
Director
Owner manager
Volunteer
OthersPROFESSIONAL
ACCOUNTANTS IN BUSINESS
SECTION 300 - INTRODUCTION
Self-interest
Self-review
Advocacy
Familiarity
Intimadation
SECTION 300 - INTRODUCTION I
ncentive compensation arrangement
Concer
n
over
empl
oyment
securit
y
SELF-INTEREST THREATS
SECTION 300 - INTRODUCTION
THREATS
ADVOCACY THREATPA may promote the organization’s position in some way03
SELF-REVIEW THREATDetermining the appropriate accounting treatment for a business combination
02
SECTION 300 - INTRODUCTIONA
ccepting a gift or preferential treatment
SECTION 300 - INTRODUCTION
Threat of dismissal or replacement of the PA in business/close/immediate family member over a disagreement
Dominant personality attempting to influence the decision making process
SECTION 300 - INTRODUCTION
Safeguards
created by the
profession,
legislation or
regulation
Safeguards in the
work environm
ent
SAFEGUARDS
Ethics
Recruitment procedure
Strong Internal Control
Policies & Procedures
Consultation
DisciplinarySE
CTIO
N 30
0 -
INTR
ODUC
TION
SECTION 310 – CONFLICTS OF
INTEREST1
• Serve a management for two employing organizations and acquire confidential information from one employing organization and PA used the information for advantage or disadvantage of the other employing organization.
2• PA undertaking a professional activity
of two parties in a partnership and assist them dissolve their partnership
3• Prepared financial information for
certain member of management who are seeking to undertake a management buyout
4
• Being responsible for selecting a vendor for the accountant’s employing organization when an immediate family member of the PA could benefit financially from the transaction.
EXAMPLE OF CONFLICTS OF INTEREST
SECTION 310 – CONFLICTS OF
INTERESTTo eliminate or reduce any of threat a PA shall exercise professional judgement and be alert to all interests and relationships that a reasonable and informed 3rd party
PA shall remain alert to the fundamental principle of confidentiality when making disclosures or sharing information within the employing organization and seeking guidance of 3rd parties.
PA should apply safeguards to eliminate the threat to an acceptable level if not the PA should decline to undertake or discontinue the professional activity that would result in conflict of interest.
SECTION 310 – CONFLICTS OF
INTEREST-Restructuring or
segregating-Obtaining
appropriate oversight
-Withdraw from the decision-making
process-Consulting with 3rd
parties
SAFEGUARDS
-Significance of relevant interests or
relationships-Significance
threats created
EVALUATE
- Interest and relationships
between the parties involved
- Implication for relevant parties
IDENTIFY
SECTION 310 – CONFLICTS OF
INTERESTDISCLOSE • Necessary to disclose the nature of the conflict
to the relevant parties
VERBAL• Disclosure is verbal, consent is verbal or
implied the PA is encouraged to document the nature of the circumstances giving rise to the COI
SECTION 320 – PREPARATION AND REPORTING OF INFORMATION
Involve in preparation and reporting of information shall do in fairly,honestly and accordance with professional standard.
Involve in preparation and approval of financial statement shall satisfied that FS presented accordance with financial reporting standard
SECTION 320 – PREPARATION AND REPORTING OF INFORMATION
Classifies and record in timely and proper.
Represent the fact accurately and completely.
SECTION 320 – PREPARATION AND REPORTING OF INFORMATION
Threats are created
Threats should be evaluated
Significance of threats
SECTION 330 – ACTING WITH SUFFICIENT
EXPERTISEFundamental principle professional competence needs to:
- Undertake significant tasks- Obtain specific training or experience
PA not intentionally mislead an employer to their level of expertise
SECTION 330 – ACTING WITH SUFFICIENT
EXPERTISE
Insufficient time to completing the duties
Inadequate information for performing duties
Inadequate resources for performance of the duties
Circumstances that create a threat to a PA in performing duties :
SECTION 330 – ACTING WITH SUFFICIENT
EXPERTISE • Obtaining additional
advice/training• Adequate time available
to performing duties
• Obtaining assistance from
someone with the necessary expertise
• Consulting with superiors within organization
• Consulting with independent experts
• To seek guidance from the institute.
SECTION 340 – FINANCIAL INTERESTS, COMPENSATION AND INCENTIVES
LINKED TO FINANCIAL REPORTING AND DECISION MAKING
• In certain circumstances, may create threats to comply with the fundamental principles.
Examples of circumstances that
may create self- interest threats:
• Direct/indirect financial interest• Profit related bonus• Directly/indirectly deferred
bonus• Compensation arrangements
SECTION 340 – FINANCIAL INTERESTS, COMPENSATION AND INCENTIVES
LINKED TO FINANCIAL REPORTING AND DECISION MAKING
Further compounded by:-Pressure from superiors or peers in the employing organization(participate in the same arrangements)
Self Interest threats from:
-compensa
tion-incentive arrangem
ents
-Alert to the principle of integrity-Straightforward and honest in all relationship
Professional
accountant shall :
-not manipula
te-use
confidential info
for personal gain or
for others.
SECTION 340 – FINANCIAL INTERESTS, COMPENSATION AND INCENTIVES
LINKED TO FINANCIAL REPORTING AND DECISION MAKING
EVALUATE
SAFEGUARDS
SIGNIFICANCE OF THREAT
S
-NATURE OF INTEREST-SIGNIFICANCE OF INTEREST(PERSONAL
CIRCUMSTANCES)
SECTION 340 – FINANCIAL INTERESTS, COMPENSATION AND INCENTIVES
LINKED TO FINANCIAL REPORTING AND DECISION MAKING
SAFEGUARDS
Up to date education on
ethical issues & on the legal restrictions.
Disclosure
Internal &External control
procedure
Policies & Procedures
Consultationwith superior
Consultation- employing
Organization/Professional
bodies
SECTION 350 – INDUCEMENTSRECEIVING
OFFERS1
• PA may be offered an inducement.
• Various forms
2 • Offers of inducement create threats
3• Encourage illegal or
dishonest behaviors or obtain confidential information.
4 • Existence & significance of any threats
5 • Significance of threats shall be evaluated & safeguards
SECTION 350 – INDUCEMENTSMAKING
OFFERS
1
-Expected or under pressure to offer inducement-To influence judgment-Obtain confidential information
2
-Come from within employing organizationExternal individual or organization-Suggestion actions or decisions that advantage for business-May influence
3
-PA shall not offer an inducement to improperly influence professional judgment of 3rd party
4
Pressure on unethical inducement from employing organization-PA must follow principles and guidance(Part A)