Under the ICAI Code of Ethics, the CONCEPTUAL FRAMEWORK requires a Chartered Accountant to:
AIDENTIFY threats to compliance with fundamental principles, EVALUATE those threats, and ADDRESS them by eliminating or reducing them to an acceptable level
BIssue a written declaration of independence at every audit engagement
CMaintain a 7-year work paper retention for all client engagements
DApply different ethical standards based on client industry
Answer & Solution
Correct answer: A. IDENTIFY threats to compliance with fundamental principles, EVALUATE those threats, and ADDRESS them by eliminating or reducing them to an acceptable level
The Conceptual Framework (three steps: identify, evaluate, address) is the core mechanism for applying the fundamental principles. Threats include self-interest, self-review, advocacy, familiarity, and intimidation. Safeguards include education/training, professional standards, corporate governance regulations, etc. Other items (declarations, retention periods) are operational requirements, not the conceptual framework itself.
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