CIMA F1 Syllabus A. Regulatory Environment Of Financial Reporting - Ethical Threats - Notes ^{6 / 7}

You are an ASS IF you get caught doing any of these ;-)

A dvocacy - being seen to act on behalf of your client as opposed to being independent

S elf-interest - Acting in your own best interests instead of being objective 

S elf-review - Losing objectivity by reviewing your own work

I ntimidation - Not acting ethically because you’re being intimidated by someone

F amiliarity - Losing independence as you are too close to the subject / person

Safeguards against these threats:

1. Be professional

   CPD; Corporate governance regulations; professional monitoring and discipline

2. Create the right environment

   Internal controls, reviews, ethics codes, discipline and reward systems

3. Individual ethics 

   comply with profession standards; mentoring, contact ACCA/CIMA if in doubt, whistle-blowing

Examples

• Advocacy threat

  The audit firm giving evidence in court on behalf of the client

• Independence threat

  Recruiting senior management for the client.

Example of Safeguards

1. Rotating senior assurance team personnel

2. Discussing ethical issues with those charged with governance of the client

3. Getting another firm to perform part of the engagement