The responses below are provided on a general basis and should not be taken as a substitute for professional judgment. They do not constitute any professional advice. Professional advice from an accountant, auditor, consultant or other advisor should be sought where appropriate. ISCA and its staff make no representations or warranties of any kind, express or implied, in relation to the responses and disclaim all liabilities for any claim, loss or damage of any kind, howsoever arising, in connection with the responses, including any use of or reliance on them.
Does the Code of Professional Conduct and Ethics advocate a cooling off period for auditors, which prevent them from serving as receivers of their former clients?
Based on the Code of Professional Conduct and Ethics, there is no specific requirement for a cooling off period for auditors to prevent them from serving as receivers of their former clients.
However, we would like to bring your attention to Section 220 (para 220.1) which states that, “a professional accountant should not allow a conflict of interest to compromise professional or business judgement." As such, an ex-auditor may, prior to accepting the position as receiver, wish to address the possible threat to objectivity, since there is a likelihood that past audit reports reflecting a “clean bill of health” for the company’s financials are likely to be challenged by the fact that the company is currently on receivership.
Is there a conflict of interest if an auditor engages the service of its audit client, who is a solicitor, to act on its behalf?
You may wish to note that paragraph 290.125 of the Code of Professional Conduct and Ethics states that the purchase of goods and services from an audit client by the firm (or from a financial statement audit client by a network firm) or a member of the audit team would not generally create a threat to independence provided the transaction is in the normal course of business and on an arm’s length basis. However, such transactions may be of a nature or magnitude significant enough to create a self-interest threat.
If the threat created is other than clearly insignificant, safeguards should be considered and applied as necessary to reduce the threat to an acceptable level. Such safeguards might include:
(a) Eliminating or reducing the magnitude of the transaction; and
(b) Removing the individual from the assurance team.
You may wish to refer to Paragraph 250 of the ISCA Code of Professional Conduct and Ethics (ISCA Code) which deals with the marketing of public accounting services by professional accountants in public practice. Paragraph 250.2 also states that professional accountants in public practice should not bring the profession into disrepute. Professional accountants in public practice should be honest and truthful and should not:
(a) Make exaggerated claims regarding the services they are able to offer, the qualifications they possess, or experience they have gained; or
(b) Make disparaging references or unsubstantiated comparisons to the work of others.
Members should also comply with all other general rules and legislation that may apply.
A company employs foreigners without a work permit/employment pass. This happens because either the work permit/employment pass application has been rejected and is pending appeal with MOM or the work permit application has yet to be approved. In the meantime, the prospective employee was asked to start work. By law, the prospective employee is only allowed to start work upon receiving a valid work permit or employment pass. The accountant of this company finds himself in a dilemma as to whether to report the matter to the Ministry of Manpower (MOM), but the actions had been sanctioned by the general manager of the company to whom the accountant reports to. There is the risk that the accountant may lose his job if he reports the matter to MOM. What would be the advice to the accountant who is a CA Singapore in the above? Can the CA Singapore claim that Human Resource matters are not part of his domain?
A. ISCA members are required to comply with the Code of Professional Conduct and Ethics (ISCA Code). A professional accountant in business (PAIB) has to comply with the fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour established in Part A (General Application) of the ISCA Code.
As indicated in paragraph 150.1 of the ISCA Code, the principle of professional behaviour imposes an obligation on members to comply with relevant laws and regulations and avoid any action that the professional accountant knows or should know may discredit the profession.
Part C (PAIBs) of the ISCA Code contains application guidance and provides examples of safeguards that may be appropriate to address threats to compliance with the fundamental principles and also provides examples of situations where safeguards are not available to address the threats and consequently the activity or relationship creating the threats should be avoided.
Paragraph 300.15 found in Part C of the ISCA Code states that in circumstances where a professional accountant in business believes that unethical behaviour or actions by others will continue to occur within the employing organisation, the professional accountant in business should consider seeking legal advice. In those extreme situations where all available safeguards have been exhausted and it is not possible to reduce the threat to an acceptable level, a professional accountant in business may conclude that it is appropriate to resign from the employing organisation.