1 Code of ethics and conduct

1.1 Fundamental principles

• Integrity - (truth)
  straightforward and honest
  fair dealing and truthfulness
• Objectivity - (fairness)
  not allow bias, conflicts of interest or undue influence
  事实独立和形式独立
• Professional behavior
  compliance
  avoid action that discredit the profession
• Professional competence and due care
• Confidentiality

1.2 Threats

• Self-interest
• Self-review
• Advocacy 过度推介
• Familiarity
• Intimidation

1.3 Safeguards

道德风险规避方法

2 Professional liability

2.1 Legal liability

• criminal offenses 刑事诉讼
• civil law 民事诉讼

2.2 Negligence（过失）

It seeks to provide compensation to a person who has suffer loss due to another person's wrongful neglect.

• An injured party must prove three things:
  • A duty of care exists
  • This duty of care was breached
  • The breach caused the injured party (financial) loss

Client的duty of care是默认存在的，而第三方的duty of care需举证是否存在

有共同连带责任的几方(Joint and several liability)，原告可以起诉其中的任意一方要求其承担全部赔偿，所以四大更容易成为原告起诉的对象。这时，会计师事务所可在合同中附加Liability limitation agreement (LLM) 责任限额条款来事先约定可寻求的最大赔偿金额

3 Fraud

3.1 Conditions lead to fraud

• Incentives/pressures
• Opportunity
• Attitudes/rationalisations（自我行为的合理化）

3.2 Responsibilities

对出现舞弊的责任

3.3 Audit approach

• 保持职业怀疑态度
• 询问管理层关于由于舞弊导致的重大错报风险的评估
• 随机询问管理层或员工是否有可疑行为
• 与内审讨论
• 了解企业中有哪些实施舞弊的机会，增加审计的不可预见性
  • nature: more observation and inspection
  • timing: interim audit
  • extent: change sample size
• 讨论财报因舞弊而产生重大错报的敏感性susceptibility
• 了解应对舞弊的内控措施

3.4 Report

审计意见报告

4 Quality Control

4.1 At a firm level(ISQC 1)

4.1.1 Objective

To establish and maintain a system of quality control to provide it with reasonable assurance that:

• The firm and its personnel comply with professional standards and laws
• Reports issued are appropriate

4.1.2 Policies and procedures

1. Leadership responsibilities for quality within the firm

   • training to ensure understanding of objectives and procedures under ISQC1
   • internal culture (培养重视质量控制内部氛围)
   • oversight (任命监督人员，需具备experience/ability/authority)

2. Ethical requirements
   五大威胁和独立性

3. Acceptance and continuance of client relationship and specific engagements

4. Human resource
   保证sufficient personnel with capabilities/competence/ethical

   • Recruitment
   • Performance evaluation
   • Capabilities&Competence
   • Career development
   • Promotion
   • Compensation
   • Personnel needs

5. Engagement performance

   • 制定标准业务流程手册，包括方面Direction/Consultation/Supervision/Resolution of deputies/Review
   • 意见不同时，要等争议解决才能出报告。此时会有intervention of quality control reviewer. 三种review：peer/hot/cold/ review.

6. Monitoring

   • To ensure QC procedures are: Relevant/Operating effectively/Adequate/Complied with
   • Monitoring activities should be reported on to management annually

4.2 At an individual audit level

专门针对审计业务质量控制的规定-ISA220

Why is audit quality a concern?

• Increase public confidence
• Faced with great pressure
  • Tight deadlines/Restrictions on audit fees, 审计质量需关注value for money
  • issues relating to competence
  • ethical dilemmas
  • the extent of judgement, 如会计估计，需保持职业怀疑态度

5 Obtaining and accepting professional appointments

5.1 Change in auditors

Why change?

• Audit fee, too high or poor value for money
• Size, not fit
• Audit firm does not seek re-election or resign
• Personality: client falls out with audit staff, a breakdown in the working relationship
• Audit Rotation

客户更换会计师事务所的原因

5.2 Advertising and audit fees

5.2.1 Advertising

允许打广告，但不得有损职业声誉，也不能贬损其他事务所和审计师的工作

5.2.2 Audit fees

• fair and reasonable
• the basis for charging fees should be mentioned in the engagement letter
• not be charged on a contingency
• commission is allowed（推荐所需的佣金或手续费可以收取，但必须是一次性的且充分披露）

客户的规模和负责性不变时，审计费用应该是逐年降低的

• Time spent
• Client's system and procedures
• Risk of the first year of an audit

Lowballing is charging a fee in unsustainably low level.

• threats to independence (self-interest, intimidation)
• unprofessional (because smaller firm cannot compete)

5.3 Tendering

存在潜在的一个客户
客户是否需要这项审计工作
能力，时间和收费问题
牵线人是谁，谁推荐的
为什么客户来找？声誉好？有人推荐？对之前事务所不满？
找我们做什么？风险？道德问题？

Access the risk
Company research
Credit reference agency
the most recent published accounts
background information (industry and business environment)
less "technical" method (newspaper)
contact with trade association for reputation

Capable of doing the work for a reasonable fee
Amount of work required, resource available, location of client
preliminary estimate of the fee

Content of tender document

• Outline of the audit firm（案例中事务所的实力，针对客户的需求）
• Identify the audit requirements of the client （明确法律强制要求和客户自身需求和特点）
• Deadline （客户的时间要求是否合理）
• Quality control and ethics
• Additional non-audit and assurance services

审计投标文件内容

审计程序应用

5.4 Acceptance

接受业务时需考虑：

• Technical competence
• Sufficient resource
• Ethical and independent issues
• Risk (money laundering, politically exposed person)
• Obtain references for the entity's directors
• Professional clearance （职业清障程序，与前任审计师沟通有没有未解决问题和需要注意的地方）
• Terms of engagement

接受审计业务