ISA 200 Overall Objective of the Independent Auditor, and the Conduct of an Audit in

Accordance with International Standards on Auditing defines professional scepticism as

‘an attitude that includes a questioning mind, being alert to conditions which may
indicate possible misstatement due to error or fraud, and a critical assessment of audit
evidence.’

Role and responsibility

The proposed revisions to the Code explain that compliance with the Code enables
accountants to meet their responsibilities to act in the public interest.

Objectivity and professional behavior

Objectivity is defined as actual exercise of professional or business judgements, without

these being compromised by factors such as bias, conflicts of interest or any form of
undue influence by, or undue reliance on other parties.

the revised description of ‘objectivity’ highlights the risks of technology impairing a

professional accountant’s objectivity.

The Exposure Draft also proposes to strengthen the fundamental principle of

"professional behaviour" by including a requirement that professional accountants must
behave in a manner that is consistent with the profession’s responsibility to act in the
public interest, rather than just being focussed internally on the profession itself. This
proposed revision is therefore aimed at reinforcing the relationship between compliance
with the five fundamental principles and a professional accountant’s responsibility to act
in the public interest.

Integrity

integrity includes having the determination to act appropriately when confronted with
dilemmas or difficult situations, providing the following examples of what this might
involve:

• standing one’s ground when facing pressure to do otherwise during the course of
performing professional activities, or
• challenging others when appropriate, even when doing so creates potential adverse
personal or organisational consequences.
 Moral courage : courage to act morally is an underpinning qualitative characteristic
required of a professional accountant.

Application of the conceptual framework: having an enquiring mind

professional accountants should have a mindset that encapsulates the following

characteristics:

• The ability to obtain and understand information relevant for making reliable judgements
based in facts and circumstances which are known to the professional accountant
• The capability to make informed challenges of the views developed by others
• Sensitivity to the integrity of information, including the source of the information and the
appropriateness of its presentation, and
• Be able to withhold judgement until careful consideration can be given to all known and
relevant available information.

defines ‘having an inquiring mind’ as:

i. being open and alert for situations and information (or the lack thereof) that might
require further investigation; and

ii. considering whether there is a need to critically evaluate the information obtained
where the need for, extent and nature of, any investigation, including critical evaluation,
will depend on the nature, scope and outputs of the professional activity being
undertaken.
 Application of the conceptual framework: bias

list of common forms of bias in the Code. These are as follows:

• Anchoring bias: a tendency to use an initial piece of information as an anchor against

which subsequent information is adequately assessed

• Automation bias: a tendency to favour output generated from automated systems, even
when human reasoning or contradictory information raises questions as to whether such
output is reliable or fit for purpose

• Availability bias: a tendency to place more weight on events or experiences that

immediately come to mind or are readily available than on those that are not

• Confirmation bias: a tendency to place more weight on information that corroborates an

existing belief than information that contradicts or casts doubt on that belief

• Groupthink: a tendency to think or make decisions as a group that discourages

creativity or individual responsibility

• Overconfidence bias: a tendency to overestimate one’s own ability to make accurate

assessments of risk and other judgements or decisions

• Representation bias: a tendency to base an understanding on a pattern of experiences,

events or beliefs that is considered to be representative

• Selective perception: a tendency for a person’s expectations to influence how the

person views a particular matter or person

Application of the conceptual framework: importance of organisational

culture ( QUITE IMPORTANT AND CAN APPEAR IN QC PROFESSIONAL ISSUE
QUESTION ALSO )

The IESBA also believes that the internal culture of an employer, whether it is an
audit firm of professional accountants or another type of organisation, can have a
significant impact on whether or not professional accountants comply with the
Code and act ethically. The Exposure Draft therefore proposes to emphasise the
importance of a positive internal organisational culture to the effective application of the
conceptual framework by introducing new application material within the Code itself. In
particular it explains that ethical culture is most effective when:
(a) Leaders and those in managerial roles hold themselves and others accountable for
demonstrating the ethical values of the organisation

(b) Appropriate education and training programs, management processes, and

performance evaluation criteria that promote that ethical culture are in place: and

(c) Ethical values are adhered to in dealings with third parties.

These proposed changes are complimentary to the work being carried out by the IAASB
in relation to Proposed International Standard on Quality Management 1, Quality
Management for Firms that Perform Audits or Reviews of Financial Statements, or
Other Assurance or Related Services Engagements, which sets out requirements and
application material in the relation to the firm’s responsibility to design and implement an
effective system of quality management.