Professional Ethics, Independence and Quality Control
The IESBA Code and Armenian adoption
Armenia applies the IESBA International Code of Ethics, which rests on five fundamental principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. Independence applies to audit and review engagements and comprises independence of mind and independence in appearance. Candidates must apply the conceptual framework: identify threats, evaluate their significance, and address them by eliminating the circumstance, applying safeguards, or declining the engagement.
Threats and safeguards
Know the five threat categories: self-interest, self-review, advocacy, familiarity, and intimidation. Traps: providing bookkeeping services to an audit client creates a self-review threat; a long association with a client creates a familiarity threat; fee dependence creates a self-interest threat. Prohibited non-assurance services for public-interest entity audits include assuming management responsibility and certain tax and valuation services.
Quality control (ISQM 1 and ISQM 2)
ISQM 1 requires a firm-level system of quality management with a risk-based approach and eight components, including governance, engagement performance, and monitoring and remediation. ISQM 2 governs engagement quality reviews for listed entities and other high-risk engagements. ISA 220 (Revised) addresses engagement-level quality management.
Worked rule of thumb
When a threat is identified, ask: can it be eliminated? If not, can safeguards reduce it to an acceptable level? If not, decline or withdraw. Document the judgement.
Regulation of the Audit Profession in Armenia
Oversight and licensing
Audit activity in Armenia is regulated under the Law on Audit Activity, with oversight by the Ministry of Finance and a public oversight body. Auditors must be qualified, licensed, and subject to continuing professional development. Firms must be registered; statutory audits of public-interest entities require additional requirements, including quality control and, where applicable, rotation of engagement partners. Understand the distinction between the licensing authority, professional bodies, and the public oversight mechanism.
Auditor duties and liability
Auditors owe duties to shareholders and, in some contexts, to third parties. Liability may be contractual or civil (tort); Armenian law also provides for administrative and criminal liability in cases of knowingly false audit reports. Traps: questions test the auditor's obligation to report certain matters to regulators or the client's management, and the limits of confidentiality (legal or regulatory disclosure overrides it).
Independence and rotation
Partner rotation and firm rotation requirements apply to public-interest entities; non-audit service restrictions apply as under the IESBA Code. Documentation and retention requirements apply to audit files.
Worked rule of thumb
When a question describes a breach (e.g., an auditor who owns shares in the client), the answer usually combines three elements: the ethical threat, the regulatory consequence (disciplinary action, licence suspension), and the correct course of action (resign, dispose of the interest, or decline). Answer all three parts.