ISA 3 độc lập, đạo đức và quản trị doanh nghiệp

Chapter 3
Ethics, Independence and
Corporate Governance

Copyright  2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

3-1


Learning Objective 1:

The Nature and Importance of Professional
Ethics
•

Ethics:
–
–

Concerned with the requirements for the general wellbeing, prosperity, health and happiness of people.
Requires knowledge of moral principles, and skills in
applying them to problems and decisions.

Copyright  2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

3-2

Ethical rules
The establishment of ethical codes and disciplinary
rules does not necessarily create an ethical culture or
ensure the moral integrity of employees.
• A.1 of the Joint Code of Professional Conduct (CPC) of
ICAA and CPA Australia (from 1 July 2006 reference is
to Section A of APES 110 “Code of Ethics for Profession
Accountants” issued by the Accounting Professional
and Ethical Standards Board - APESB) indicates that
members are expected to comply with the spirit as well
as the letter of the rules.
• Failure to observe expected standards can result in
disciplinary procedures and sanctions.
•

Copyright  2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

3-3


Learning Objective 2:

Ethical Theory
•

Teleological ethics – deals with consequences or
outcomes of actions

–

•

Deontological ethics – based on duties and rights
–

•

generally, if benefits of proposed action outweighs costs,
the decision is morally correct.
duties and rights set down in rules which must be
followed.

Virtue ethics – focus on personal qualities, such as the
integrity of the decision-maker.

Copyright  2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

3-4


Learning Objective 3:

Accounting Bodies’ Code of Ethics
•

•

•

Joint CPC (APES 110) sets out main ethical
pronouncements that relate to the undertaking of an
audit.
AUS 202 (ISA 200) requires that auditors comply with
ethical rules.
Joint CPC consists of six sections, including:
–
–

Section B: Fundamental Principles of Professional
Conduct;
Section F: Professional Statements, including F1
Professional Independence, and F7 Incompatible
Business

(APES 110 covers similar issues to the CPC, but in a
different structure)
Copyright  2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

3-5


Purpose of the code of ethics
Code of Ethics — formal, systematic statement of rules
and principles developed by the community to promote
its well-being and punish undermining behaviour.

• The code therefore:
•

–
–
–

makes explicit the values implicitly required;
indicates how members should act toward one another;
provides basis for sanctions.

Copyright  2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

3-6


CPC Section B (APES 110
Section 100): Fundamental Principles
Eight fundamental principles contained in the codes of
ethics:
1.
2.
3.
4.
5.
6.
7.
8.

Public interest
Integrity
Objectivity
Independence
Confidentiality
Compliance with technical and professional standards
Professional competence and due care
Ethical behaviour

(Part A of APES 110 includes integrity, objectivity, professional
competence and due care, confidentiality and professional
behaviour).
Copyright  2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

3-7


Learning Objective 4:

Applying Ethics
•

Sound ethical decision making is dependent on:
–
–
–

knowledge of the basic principles on which moral values
and rules are based;
competence in decision making; and
the ability to choose appropriate policies and decision
procedures in different situations.

Copyright  2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

3-8


Ethical decision models
•

Three main models:
–
–
–

American Accounting Association Model
Mary Guy Model
Laura Nash Model.

Copyright  2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

3-9

Learning Objective 5:

Corporate Governance
•

Corporate Governance — system by which companies
are directed and controlled. Concerned primarily with
management and stewardship issues including:
–
–
–
–

corporate strategy
succession planning
integrity of internal control structure and
remuneration policy.

Copyright  2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

3-10


Parties in corporate governance
Board of directors
• Management

• Auditors
•

Copyright  2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

3-11


Groups advocating improved corporate
governance
•
•
•
•
•

The business community
Investors
Australian Stock Exchange (ASX)
Australian Securities and Investments Commission
(ASIC)
CPA Australia and Institute of Chartered Accountants
Australia (ICAA)

Copyright  2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

3-12


ASX Corporate Governance Council’s
Principles of Good Corporate Governance
•
•
•
•
•

Principle 1: Lay solid foundation for management and
oversight;
Principle 2: Structure the board to add value;
Principle 3: Promote ethical and responsible decision
making;
Principle 4: Safeguard integrity in financial
reporting;
Principle 5: Make timely and balanced disclosure.

Copyright  2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

3-13


ASX Corporate Governance Council’s Principles
of Good Corporate Governance (Cont.)
•

•
•
•
•

Principle 6: Respect the rights of shareholders;
Principle 7: Recognise and manage risks;
Principle 8: Encourage enhanced performance;
Principle 9: Remunerate fairly and responsibly; and
Principle 10: Recognise the legitimate interests of
stakeholders.

Copyright  2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

3-14


Audit committees
Sub-committee of board of directors, which should
consist mainly of non-executive directors;
• Auditor’s major dealings with the board of directors are
normally through this sub-committee;
• Important component of corporate governance, with
most listed companies in Australia having an audit
committee;
• Top 500 companies on ASX now required to have an
audit committee.
•

Copyright  2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

3-15


Functions of audit committees
•
•
•
•
•
•
•

Assist the board of directors;
Add to credibility and objectivity of financial reports;
Enhance auditor independence and effectiveness;
Consider appropriateness of accounting policies;
Consider policies for unethical or illegal activities;
Consider internal and management controls; and
Communication link between management, board and
auditors.

Copyright  2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

3-16


Learning Objective 6:

Whistleblowing in Australia
•

s. 311 of the Corporations Act imposes a responsibility
on auditors to inform the ASIC of any significant
contraventions of the Act discovered in the normal
course of their duties, and any other contraventions
which cannot be remedied by comment in the audit
report or by bringing the matter to the attention of
directors. Arguably, this places an obligation on the
auditor to whistleblow.

Copyright  2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

3-17


Whistleblowing defined
•

A person ‘who discloses information he (or she)
reasonably believes evidences a violation of any law,
rule, or regulation, or mismanagement, a gross waste of

public funds, an abuse of authority, or a substantial or
specific danger to public health or safety’ is a
whistleblower.’

•

United States Civil Service Reform Act of 1978

Copyright  2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

3-18


Auditor’s responsibilities regarding
whistleblowing
Auditor does not have to actively look for contraventions
of the Corporations Act;
• Decision to blow the whistle is not easy for an auditor;
• AUS 210/ASA 240 (ISA 240) also provide guidance.
•

Copyright  2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

3-19

Learning Objective 7:

The Importance of Audit Independence
Independence is a very key characteristic of an audit or
assurance service provider;
• In order that auditors can add credibility to financial
report or other subject matter, they needs to remain
independent;
• One of the eight fundamental ethical requirements of
CPC (APES 110); and
• Test for independence is a reasonable person test –
would a reasonable person having access to all facts
consider that the auditor was independent?
•

Copyright  2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

3-20


Independence – Corporations Act 2001
•

s 307C – Independence declaration.
–

•

Auditors must give directors a written declaration of their
independence, and this is to be included in the directors’
report.

s 324CA – Conflict of interest.
–

Auditor must take reasonable steps to ensure conflict of
interest situation ceases to exist. Conflict of interest is
where members of audit team are not capable of
exercising objective and impartial judgment, as judged by
a reasonable person.

Copyright  2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

3-21


Independence – Corporations Act 2001
(Cont.)
•

s 300 (1)(ca) - former auditors. Directors report is to
include names of each officer of client who was a
former partner or director of current auditor.

•

s 324CI - member of audit firm cannot become director,
company secretary or senior management of a client
until two years after ceasing to be with audit firm.

•

s 324DA - rotation of audit partners. Lead or review
partner for five successive years cannot play a
significant role in the audit of that entity for at least
another two successive years.

Copyright  2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

3-22


Independence – Corporations Act 2001
(Cont.)
•

s 300(11)(B) - non audit services. Boards of all listed
companies are required to provide a statement in their
annual report identifying all non-audit services provided
by an audit firm, fee, and explanation why provision of
service did not impair independence.

Copyright  2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett

Slides prepared by Roger Simnett

3-23


Auditor’s appointment
•

S 327B - shareholders are responsible for the
appointment of auditor:
–

•

Auditor is in breach of independence requirements if, while
auditing at a time that a s 324CH(1) relationship exists, auditor is
aware of relationship and does not take all reasonable steps to
discontinue audit.

S 324CH(1) relationships include:
Auditor or immediate family member being an officer or auditcritical member (influencing financial report) of client
– Auditor cannot provide remuneration to officer or audit-critical
employee for acting as consultant
– Auditor cannot have an investment in client
– Auditor cannot owe more than $5,000 to a client (unless a
housing loan on normal terms).
–

Copyright  2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett

Slides prepared by Roger Simnett

3-24


Auditors removal and resignation
Removal – Difficult to remove auditor.
• S 329 – Requires a resolution of company at a general
meeting of which special notice is given. Auditor entitled
to make written representation and speak at general
meeting. A copy of notice must be sent to ASIC.
• Resignation – Auditor can resign. Must have written
consent from ASIC. Application outlines reason, and
ASIC must approve the reason. Designed to ensure
independence and integrity of audit function is
maintained.
•

Copyright  2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

3-25