Trust and Ethics
The trust and ethics domain tests your ability to apply the ICAEW Code of Ethics, based on IESBA principles, to realistic accounting and assurance scenarios. You are expected to identify threats, evaluate their significance and recommend safeguards or refuse the engagement, with documentation.
Core rules and concepts
- Five fundamental principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour.
- Threat categories: self-interest, self-review, advocacy, familiarity and intimidation. Use the conceptual framework: identify, evaluate and address.
- Independence for audit and other assurance: avoid financial interests, prohibited loans or guarantees, close family employment in a position to influence, and excessive reliance on one client's fees. Long association requires rotation or other safeguards.
- Confidentiality is not absolute: disclosure may be permitted or required by law, by professional duty (for example, quality review), or with client consent. Consider NOCLAR (non-compliance with laws and regulations) and escalate internally; external disclosure may be appropriate where permitted.
- Professional scepticism means challenging evidence and not accepting management representations at face value.
Worked example
An audit senior is offered a free weekend at a client's villa shortly before the audit of revenue is completed. The self-interest threat is significant: the benefit is not trivial and is offered during a judgement-sensitive period. Accepting it could compromise objectivity and breach professional behaviour. Safeguards such as disclosure to the engagement partner are unlikely to reduce the threat to an acceptable level, so the senior should decline. If the client persists, the matter should be documented and escalated; the firm may need to consider whether the client's conduct affects the relationship.
Traps that cost marks
Naming a threat without evaluating its significance; assuming disclosure always cures a threat; treating confidentiality as absolute; missing self-review when the firm prepares and audits the same information; and failing to document the conclusion. Materiality does not justify unethical reporting.