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    Threats and Safeguards On Professional Ethics

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    Asumpta Muna
    This document discusses integrity, independence, and objectivity for auditors. It identifies five main threats to these principles: self-interest, self-review, advocacy, familiarity, and intimidation. It then describes various safeguards that can be implemented at the professional, work environment, and individual level to reduce or eliminate these threats.

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    Threats and Safeguards On Professional Ethics

    Uploaded by

    Asumpta Muna
    160 views10 pages
    This document discusses integrity, independence, and objectivity for auditors. It identifies five main threats to these principles: self-interest, self-review, advocacy, familiarity, and intimidation. It then describes various safeguards that can be implemented at the professional, work environment, and individual level to reduce or eliminate these threats.

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    Threats and Safeguards on Professional Ethics

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    This document discusses integrity, independence, and objectivity for auditors. It identifies five main threats to these principles: self-interest, self-review, advocacy, familiarity, and intimidation. It then describes various safeguards that can be implemented at the professional, work environment, and individual level to reduce or eliminate these threats.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    160 views10 pages

    Threats and Safeguards On Professional Ethics

    Uploaded by

    Asumpta Muna
    This document discusses integrity, independence, and objectivity for auditors. It identifies five main threats to these principles: self-interest, self-review, advocacy, familiarity, and intimidation. It then describes various safeguards that can be implemented at the professional, work environment, and individual level to reduce or eliminate these threats.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 10

    Integrity, Independence and Objectivity

     Objectivity: Requires members not allow bias,


    conflict of interest, or undue influence of others to
    override professional or business judgements
    Threats
    Self Interest
    This occurs as a result of your own or your close
    family’s interests-financial or otherwise
    These threats often result in what is commonly called
    a ‘conflict of interest’ situation.
    In business self-interest threat could result from
    concern over job security, or from incentive
    remuneration arrangements.
    For auditor it might be the possibility of losing a client
    or holding a financial interest in a client.
    Threats
    Self review threat
     This occurs when an auditor has to review work that
    they previously performed. For example: if the
    external auditor prepared the financial statements
    and then audited them.
     There is a risk that the auditor would not identify any
    shortcomings in their own work for fear of penalty
    (either financial or reputational).
    Threats
    Advocacy threat
     This can occur when the auditor is asked to promote or
    represent their client in some way.
     In this situation the auditor would have to be biased in
    favour of the client and therefore cannot be objective.
     This could happen if the client asked the auditor to
    promote their shares for a stock exchange listing or if the
    client asked the auditor to represent them in court
     It could include acting as an advocate on behalf of an
    assurance client in litigation or dispute with third parties.
    Threats
    Familiarity threat
     This occurs when the auditor is too sympathetic or
    trusting of the client because of a close relationship
    with them.
     This may be because a close friend or relative of the
    auditor works in a key role for the client.
     The auditor may trust their friend or relative to not
    make mistakes and therefore not review their work as
    thoroughly as they should and as a result allow material
    errors to go undetected in the financial statements.
     This can also arise after a long association with a client.
    Threats
    Intimidation threat
     Clients may try to harass or bully auditors into giving
    preferential audit reports.
     They may use the fee as leverage. The auditor should
    not give in to such pressure and, in the
    circumstances, may choose to resign from such a
    client
    Safeguards
    Safeguards seek to reduce or eliminate threats. They
    fall into three categories created by the:
    Profession, these include:
    education and training including CPD requirements
    setting of corporate governance regulations and
    professional standards
    monitoring of professional work including disciplinary
    proceeding
    Safeguards
    Work environment; There are many examples
    which include:
    internal control systems
    review procedures
    disciplinary procedures
    organizational codes of ethics
    separate review and reporting for key engagements.
    Safeguards
    Individual ; these include:
    complying with professional standards
    maintaining records of contentious issues
    mentoring
    contacting professional bodies with queries.

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