- 10 Marks
AAA – May 2021 – L3 – Q1a – Rules of professional conduct | Professional responsibility and liability
Discuss the impact of independence issues on the public perception of a multinational accounting firm based on a real-life scenario involving a conflict of interest.
Question
Fundamental principles require that a member of a professional accountancy body behave with integrity in all professional, business, and financial relationships and strive for objectivity in all professional and business judgments. Objectivity can only be assured if the member is and is seen to be independent. Conflicts of interest have an essential bearing on independence and the public’s perception of the accounting profession’s integrity, objectivity, and independence.
The following scenario is a press report on a multinational firm of accountants:
The regulatory body directed a partner in a firm that he must resign because he was in breach of the regulatory body’s independence rules. His brother-in-law was the Financial Controller of an audit client. He was informed that the alternative was for him to move his home and place of work at least 400 miles from the client’s office, even though he was not the reporting partner. This made his job untenable. The accounting firm saw the regulatory body as ‘taking its rules to absurd lengths’. Shortly after this comment, the multinational firm announced proposals to split the firm into the following areas: audit, tax and business advisory services; management consultancy; and investment advisory services.
Required:
In relation to integrity, objectivity and independence, discuss the impact the above events may have on the public perception of the multinational firm of accountants. (10 marks)
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