Under the ICAI Code of Ethics, the REASONABLE AND INFORMED THIRD PARTY test is:
AA test applied only by auditors during the planning phase of an engagement
BAn impartial assessment of whether another reasonable, informed person would reach the same conclusion as the accountant — applied when evaluating compliance with fundamental principles
CA peer-review mechanism by the ICAI Disciplinary Committee
DA statutory requirement under the Companies Act to disclose all financial decisions to third parties
Answer & Solution
Correct answer: B. An impartial assessment of whether another reasonable, informed person would reach the same conclusion as the accountant — applied when evaluating compliance with fundamental principles
The reasonable-and-informed-third-party test (under the conceptual framework) requires the accountant to consider whether their conclusion would be the same as a reasonable, informed third party's. The third party doesn't need to be an accountant, but has relevant knowledge to assess impartially. This is a self-check against bias / preconception in professional judgment.
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