Question 2
a) Explain how professional code of ethics address possible conflicts of
interest facing accountants.
Under a section 220, conflicts of interest under Code of Ethic for
Professional Accountants stated that a professional accountant in public
practice should take reasonable steps to identify circumstances that could
pose a conflict of interest. Such circumstances may give rise to threat to
compliance with the fundamental principles. Besides that, a professional
accountant should evaluate the significance of any threats. Evaluation
includes considering, before accepting or continuing a client relationship or
specific engagement, whether the accountant has any business interest, or
relationship with the client or third party that could give rise to threat. If the
threat is significant, a safeguard should be considered and applied as
necessary to eliminate them or reduce them to an acceptable level.
Safeguards should ordinarily include the professional accountant in
public practice depending upon the situation giving rise to the conflict:
a) Notifying the client of the firms business interest or activities that
may represent a conflict of interest, and obtaining their consent to act
in such circumstances; or
(b) Notifying all known relevant parties that the professional
accountant in public practice is acting for two or more parties in
respect of matter where their respective interests are in conflict, and
obtaining their consent to so act;
(c) Notifying the client that the professional accountant in public
practice does not act exclusively for any one client in the provision of
proposed services and obtaining their consent to so act.
The following additional safeguards should also be considered:
(a) The use of separate engagement team; and
(b) Procedures to prevent access to information; and
(c) Clear guidelines for members of the engagement team on issue of
security and confidentiality; and
(d) The use of confidentiality agreements signed by employees and
partners of the firm; and
(e) Regular review of the application of safeguard by a senior individual
not involved with relevant client engagement.
Where a conflict of interest poses a threat to one or more of the
fundamental principles including objectivity, confidentiality and professional
behavior that cannot be eliminate or reduce to acceptable level, the
professional accountant should not accept a specific engagement or that
resignation from one or more conflicting engagements is required. Finally,
when accountant has request consent from client to act for another party in
respect of matter where the respective interests are in conflict and that
consent has been refused by the client, then the professional accountant
must not continue to act for one of the parties in the matter giving rise to the
conflict of interest.