54. A CPA sole practitioner purchased stock in a client corporation and placed it in a trust as an educational fund for the CPA's minor child. The trust securities were not material to the CPA but were material to the child's personal net worth. Would the independence of the CPA be considered to be impaired with respect to the client? Show A. Yes, because the stock would be considered a direct financial interest and, consequently, materiality is not a factor. B. Yes, because the stock would be considered an indirect financial interest that is material to the CPA's child. C. No, because the CPA would not be considered to have a direct financial interest in the client. D. No, because the CPA would not be considered to have a material indirect financial interest in the client. AT – Code of Professional Ethics Red Sirug Page 1 AUDITING THEORY Red Sirug CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS IN THE PHILIPPINES (with Multiple Choice Questions) Code of Ethics for Professional Accountants in the Philippines: The Code of Ethics for CPAs in the Philippines is the document that contains the norms and principles governing the practice of the accountancy profession in the highest standards of ethical conduct. Preface to the Code of Ethics: Based on the revised Code of Ethics developed by the International Federation of Accountants (IFAC), with certain modifications Approved by the Board of Directors of PICPA and recommended for adoption by the BOA Adopted by the BOA and approved by the PRC as part of the rules and regulations of the BOA for the practice of the accountancy profession Sets the fundamental principles and provides guidance as to the application of such fundamental principles to typical situations Compliance with the Code is mandatory for all CPAs and is applicable to all professional services performed in the Philippines In case of noncompliance: Failure to comply with Code may result in an investigation into the CPA’s conduct. When provision of the Code is in conflict with Philippine statutory requirement the Philippine statutory requirement shall prevail. Reasons why the Code was adopted: a. To ensure the highest quality of performance; and b. To maintain public confidence in the profession Parts of the Code of Ethics: 1. Part A – general application of the Code and it applies to all professional accountants Part A establishes the fundamental principles of professional ethics for professional accountants and provides a conceptual framework that serves as a guide for applying those principles 2. Part B – applies to professional accountants in public practice 3. Part C – applies to professional accountants in business Fundamental Principles: The fundamental principles arethe basic ethical requirements which are required to be observed and complied with by professional accountants in order to achieve the objectives of the accountancy profession. 1. Integrity – A professional accountant should be straightforward and honest in all professional and business relationships. Integrity implies not merely honesty but also fair dealing and truthfulness. To maintain integrity, a professional accountant should avoid association with information (reports, returns, communications and other information) that contains materially false, incomplete or misleading information or information that contains statements or information furnished recklessly 2. Objectivity – A professional accountant should not allow bias, conflict of interest or undue influence of others to override or compromise his professional or business judgment. Objectivity is a combination of impartiality, intellectual honesty and a freedom from conflicts of interest. Relationships that bias or unduly influence the professional judgment of the professional accountant should be avoided. 3. Professional competence and Due care: a. Professional competence. A professional accountant has a continuing duty to maintain professional knowledge and skill at the level required to ensure that a client or employer receives competent professional service. Competent professional service requires the exercise of sound judgment in applying professional knowledge and skill in the performance of such service. Two phases of professional competence: a. Attainment of professional competence: A professional accountant should have initially a high standard of general education, followed by specific education, training, What are the IFAC Code of Ethics?The fundamental principles within the Code – integrity, objectivity, professional competence and due care, confidentiality and professional behavior – establish the standard of behavior expected of a professional accountant (PA) and it reflects the profession's recognition of its public interest responsibility.
Which type of ethical Code is used by IFAC to cover the behaviour of all professional accountants?110.1 The principle of integrity imposes an obligation on all professional accountants to be straightforward and honest in professional and business relationships.
What is the Code of professional conduct in accounting?The IESBA code requires professional accountants to comply with five fundamental principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behavior.
What is IFAC in auditing?Understanding International Federation Of Accountants (IFAC)
IFAC's boards set international standards in a number of areas, including auditing, quality control, education, public sector accounting and ethics for professional accountants. IFAC was founded in 1977 in Munich, Germany. Today, it is based in New York City.
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