Short Essay Questions- Ethics and Accountancy

Short Essay Questions- Ethics and Accountancy

Question # 01

According to Brooks and Dunn (2009), an accountant has a significant role to play in the best interest of both the public (shareholders) and the profession. In that case, it makes an accountant equally responsible to place his/her duty to the public ahead of his/her duty to the profession. To put it straight, the relationship between an accountant and the shareholder (public) is based on a soft; yet firm base of trust that is being put by shareholders into accountants. Shareholders entrust them to look after the proper utilization and allocation of their funds with the management, who will carry out their fiduciary duties, which are entrusted by the shareholder (Brooks & Dunn, 2009).

Being a public accountant, the professional accountability becomes even crucial and the accountant must ensure that he/she does not involve in an activity or does not undertake a decision that can hurt the credibility of their profession as well as the trust of public. Therefore, an accountant can meet the criterion of ethical practices only when he equally satisfies the public interest and professional duties on a ground of rational decision making (Brooks & Dunn, 2009).

Question # 02

Conflict of interest is considered to be a serious apprehension in the professional ethics because it can affect the reliability of the judgment only when it is required (Davis & Johnston, 2009). In the light of code of ethics for professional accountants, a public accountant may face a situation in which the interest of two clients is conflicting (may be due to the dispute over the transaction in question), and it may pose a threat to the confidentiality or objectivity of the practice (CIMA, 2010).

According to Code of ethics B section 220 clause 1, provided with specific provisions a public professional accountant's encounter with two clients who have a conflict of interest might not be improper (ICAEW, 2013). However, the accountant is required to undertake reasonable steps to identify and evaluate significance of circumstances that may pose a threat and imply safeguards if required to minimize the impact of threat in order to bring it to an appropriate level of acceptance (ICAEW, 2013).

Question # 03

The term 'due care' refers to an ethical value that requires accountants to observe all standards of ethical accounting (Vitez, 2013). It requires accountants to exercise diligence, competence and develop a proper understanding of financial information. Therefore, exercise of due care would require accountants to direct and supervise other accountants with little understanding of the profession of accounting (Vitez, 2013). In the light of AU Section 230, due care needs to be exercised in the audit planning and performance and formation of the report (PCAOB, 2002).

On the contrary, professional skepticism is considered to be a requisite and an essential function in the process of auditing (PCAOB, 2012). According to the standard of PCAOB (2012), professional skepticism is defined as an attitude that incorporates critical assessment and questioning mind towards audit ...