1-Fundamental principles
Fundamental principles require that a member of a professional accountancy body should behave with integrity in all professional, business and financial relationships and should strive for objectivity in all professional and business judgments. Objectivity can only be assured if the member is and is seen to be independent. Conflicts of interest have an important bearing on independence and hence also on the public's perception of the integrity, objectivity and independence of the accounting profession.
The following scenario is an example of press reports in recent years which deal with issues of objectivity and independence within a multinational firm of accountants.
'A partner in the firm was told by the regulatory body that he must resign because he was in breach of the regulatory body's independence rules, as his brother-in-law was financial controller of an audit client. He was told that the alternative was that he could move his home and place of work at least 400 miles from the offices of the client, even though he was not the reporting partner. This made his job untenable. The regulatory body was seen as 'taking its rules to absurd lengths' by the accounting firm. Shortly after this comment, the multinational firm announced proposals to split the firm into three areas between audit, tax and business advisory services; management consultancy; and investment advisory services.'
Required
Discuss the impact that the above events may have on the public perception of the integrity, objectivity and independence of the multinational firm of accountants.