guide to ethical standards

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Steven Collings
Audit and Technical Partner
Leavitt Walmsley Associates Ltd
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Professional ethics – two words which are central to our profession. How many times do you see auditors in the firing line because of claims that professional ethics have been breached? asks Steve Collings.

Disciplinary pages of various professional bodies are regularly littered with proceedings taken against practitioners because they have failed to comply with professional ethics, such as levels of fees or honesty and integrity. 

In the world of auditing there are five ethical standards which auditors must adhere to and this article will recap on the fundamental aspects of these five standards which are:

  • ES 1        Integrity, objectivity and independence
  • ES 2        Financial, business, employment and personal relationships
  • ES 3        Long association with the audit engagement
  • ES 4        Fees, remuneration and evaluation policies, litigation, gifts and hospitality
  • ES 5        Non-audit services provided to audit clients

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22nd Aug 2011 06:30

Long Association with a client & Professional fess

My comments on the above ethical issues from the perspective of SMP - it boils down to 'professional conscience'.

A good auditor must understand the business of his client and the client himself. It takes time to achieve that. However, auditor may faced with 'familiarity' threat issue. Its a catch-22 issues. In the case of SMP, clients tend to stay longer and eventually became personal friends. Eventually, the auditors may render non-audit service and advice. Then, professional independence is a fine line to walk!

Fee is a more tricky issue to address. It is very difficult for the auditor not to make business-expidiency decision when negotiating on fee. How one can honestly spliting audit and non-audit fees when serving a client where 'total package' is what the client is looking for?

Lastly, who came up with the 15% 'benchmark'?

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