Ethics and Corporate Governance Flashcards

When a professional accountant faces a self-interest threat to their objectivity, what is generally the most appropriate safeguard?

Answer: Removing the source of the threat, such as disposing of the financial interest or withdrawing from the engagement

The most effective safeguard eliminates the source of the threat rather than merely mitigating it; for self-interest threats this typically means removing the financial interest or withdrawing.

Which of the following is the best example of a 'familiarity threat' under the IESBA Code of Ethics?

Answer: An auditor having a long-standing close personal friendship with the client's finance director

A familiarity threat arises when close or longstanding personal relationships cause a professional accountant to become too sympathetic to a client's interests and less willing to challenge them.

The fundamental principle of confidentiality for professional accountants means they must:

Answer: Not disclose confidential information to third parties without proper authority, except where a legal or professional duty exists to do so

Confidentiality is not absolute; professional accountants must not disclose information without authority but are required to disclose in certain circumstances, such as when required by law or professional standards.

Which of the following correctly describes a 'self-review threat' in professional ethics?

Answer: A professional accountant reviewing and critically evaluating work they previously performed when forming a current opinion or conclusion

A self-review threat arises when a professional must critically assess their own prior work, making it difficult to remain objective and to identify and report errors or weaknesses.

Under the UK Bribery Act 2010, which offence is unique to commercial organisations and has no equivalent individual offence?

Answer: Failure to prevent bribery by an associated person (section 7)

Section 7 creates a strict liability corporate offence where a commercial organisation is guilty if an associated person bribes another to obtain a business advantage, unless adequate prevention procedures were in place.

The 'public interest' obligation in professional accountancy ethics means that professional accountants must:

Answer: Accept responsibility to act in a way that benefits society as a whole, not just their employer or individual client

The public interest obligation requires professional accountants to act in ways that maintain public trust in the profession and contribute to the proper functioning of commerce, finance, and the public sector.

Integrated Reporting (), as promoted by the International Integrated Reporting Council (IIRC), is best described as:

Answer: A concise communication showing how an organisation's strategy, governance, performance, and prospects create value over the short, medium, and long term across multiple capitals

Integrated reporting connects an organisation's financial and non-financial information to explain how it creates and sustains value over time, considering financial, manufactured, intellectual, human, social, and natural capitals.