Professional Ethics and Professional Skills
The Professional Ethics and Professional Skills domain tests the KICPAA Code of Ethics, which is based on the IESBA Code, and the professional skills expected of a CPA. You must identify threats, evaluate safeguards, apply independence rules and demonstrate professional scepticism in scenarios.
Core rules
- Five fundamental principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour.
- Threats: self-interest, self-review, advocacy, familiarity and intimidation. Evaluate each threat and apply safeguards or decline the engagement.
- Independence has two dimensions: independence of mind and independence in appearance. Direct financial interests, close family interests, loans and business relationships generally create unacceptable threats.
- Non-assurance services to audit clients must be assessed for self-review and advocacy threats; some services are prohibited for PIEs.
- Confidentiality is not absolute: disclosure may be required by law or permitted with client authority, and legal or regulatory obligations can override it.
- NOCLAR: respond to identified or suspected non-compliance, escalate within the entity and to the auditor, and consider withdrawal.
- Professional scepticism: question evidence, corroborate management representations and investigate inconsistencies.
Worked example
An audit partner's spouse owns 5% of the audit client. This is a direct financial interest held by an immediate family member and creates a self-interest threat. No safeguard can reduce it to an acceptable level, so the interest must be disposed of or the partner removed from the engagement; otherwise the firm must withdraw.
Traps
Treating confidentiality as absolute; accepting gifts or hospitality that create self-interest threats; relying on long familiarity as a safeguard; using management's specialist without evaluating competence; and failing to document ethical judgments.