Professional Ethics and Computerised Accounting Environment
What the domain tests
This domain tests the ethical principles and threats that apply to auditors, plus audit issues and controls in a computerised accounting environment. Expect applied questions on independence and IT controls.
Core rules
- Fundamental principles: integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.
- Threats include self-interest, self-review, advocacy, familiarity and intimidation. Safeguards include independence checks, rotation, review, training and declining the engagement.
- Confidentiality is not absolute: disclosure may be required by law or permitted with client consent.
- Computerised accounting brings speed, accuracy and easy reporting, but risks include unauthorised access, data loss, lack of audit trail, program changes and input errors.
- Controls include general IT controls such as access, backup and change management, and application controls for input, processing and output.
- The auditor may use CAATs, test data, parallel simulation or audit software, especially where the audit trail is invisible.
Worked example
A partner's spouse owns shares in an audit client. This creates self-interest and familiarity threats to independence. The firm should remove the partner from the engagement, dispose of the shares or decline the audit; disclosure alone is not enough. In a computerised system, if the client can change credit limits without a log, the auditor tests the change log, interviews staff and examines exception reports. If the audit trail is disabled, the auditor cannot rely on the application controls and may need substantive testing around the system.
Traps
Do not think confidentiality prevents reporting a legal offence; do not treat computer audit as only checking printed output; do not ignore general IT controls; and do not assume a CAAT eliminates professional judgement.