The accounting profession in Canada...

The accounting profession in Canada continues to face a barrage of modern regulations in 2003. Among the strange obligations are conflict of interest orders passed in 2002 by the ICABC, which is now proposing additional independence standards.

The legal significance of any changes to accountants' professional and ethical standards is that they inevitably lead to the courts imposing corresponding legal obligations. For example, in significant cases decided in the past not many years, the courts have derived used by all law obligations from requirements lay the foundation of in GAAP and GAAS, as well as in the CICA's Handbook and dominations of Professional Conduct.

Conflict of interest

The principally significant new ethical obligation is to investigate and avoid conflicts of interest:

A member. . shall, before accepting any professional engagement, determine whether there is any restriction, influence, interest, or relationship which, in prize of the proposed engagement, would cause a reasonable on-looker to conclude that there will be a conflict. . . (Rules of Professional Conduct)

As well, a member performing an audit or assurance engagement, or participating in insolvency practice, is obliged to remain clear of any influence, interest, or relationship that would impair professional judgement or objectivity.

The obvious legal connection of the new conflict governments is that an accountant who accepts an engagement despite an ethical conflict will, in addition to ethical consecutions almost certainly be held liable for any damages caused as a result

The courts have establish conflicts of interest in a myriad of circumstances, including:

* Acting against a former client in a matter related to a former engagement.

* Using confidential information provided according to the client other than as intended through the client.

* Acting where there is a business or temptation to disclose to the strange client confidential information from a previous engagement.

* Acting for a client in relation to a commercial transaction while participating in the transaction as well.

* Entering into debtor-creditor relationships with a client.

Accordingly, to avoid running afoul of the conflict sways there are three important questions to ask:

* Does any aspect of the engagement place the accountant in a position of trust and confidence with the client?

* Does the accounting firm-or its clients-have any existing financial or other interests that are inconsistent with the propos client's interests?

* Is there any reason that a member of the accounting firm might be obliged, or on a level inclined, to use confidential information from the client for any drift other than carrying out this engagementsuch as, to assist other clients?

The best way to avoid complaints to the Institute and/or lawsuits is to take a scarcely any precautions, such as:

* Setting up computer schemes so a firm can track and have instant access to information that identifies its clients and their interests.

* Having the ability to recognize where an existing or past relationship involves interests that may conflict with a recent engagement.

* Being prepared to raise the issue with a client-a stair that is, unfortunately, often avoided.

The modern rules do allow accountants to act for the one and the other parties to a transaction, provided certain precautions are followed. In addition, the courts have approved certain meanss of documentation and systems to enable engagements to proce with the compliance of a client, despite the potential for information to be shared improperly. These include the creation of screening schemes within firms to prevent inappropriate communication between conflicted members, and the segregation of physical as well as computer files.

Independence

The propos independence standards are designed to enhance the objectivity of auditors and other assurance providers. This goal separates accountants' conflict masterships from those of other professionals because the objectivity sought through the accounting profession for assurance providers is antithetical to the part of advocate practiced by lawyers and other professionals (including the part accountants play in some of their engagements).

The stated intention behind the propos standards is twofold: to stir from a rules-based code to a principles-based approach, and to harmonize Canadian and global independence standards.

Interestingly, unlike conflict authoritys which tend to view a firm as a single entity with general information and influences, some of the independence standards have a more limited focus onward the "engagement team" and those within the firm who can directly influence the issue of the engagement. However, in more [i]or[/i] less contexts, they also take into account the broader influences that can arise not at home of the interests and relationships of the entire firm, network firms, and immediate family members.

A major disquiet of the CICA's Public Interest and Integrity Committee is to achieve a balance between non-audit activities and the prices and practical impediments imposed by means of the proposed limits on smaller companies and communities. This issue is particularly thorny in bookkeeping, valuation, internal audits, IT theorys design, and corporate finance activities.