Code of Ethics for Professional

Accountants
 Background
• The problems that confront business executives are many. Some of the most
complex and difficult involve situations concerning right and wrong where values
are in conflict. These situations are called ethical dilemmas.

• With corporate scandals and billion-dollar bankruptcies dominating headlines,

ethics has almost become a hotter topic than earnings in the business world.
Corporate icons such as Enron's former chairman Kenneth Lay were once held up
as examples of successful business leaders.

• It is sometimes argued that business and ethics do not go together, why?

• It is inconceivable that most people would ever freely endorse the idea that
dishonesty, manipulation and taking advantage of other people were acceptable,
fundamental traits of the basic mechanism by which society makes and distributes
essential goods and services.

• But in ethical dilemmas that arise in business, the laws generally establish at least
a bare minimum for how you should act.
 Examples
• Unethical advertising: breaking advertising codes and standards
• Not telling customers about known risks associated with the
company's products
• Lack of social responsibility: e.g.
– Non observance of human rights
– Subjecting employees to an unhealthy or unsafe working
environment
– Use of child labor
– Discrimination against minorities
• Lack of accountability for actions: e.g.
– Provision of minimum financial information to stakeholders
– Creative accounting, bordering on fraud
• Corruption: giving and receiving bribes to further business interests
HKICPA Code of Ethics (COE)
 Part 1 - Fundamental Principles of the
code (Section 110)
• It provides guidance on fundamental ethical principles.
Professional accountants are required to apply this
conceptual framework to identify threats to
compliance with the fundamental principles, to
evaluate the significance of such threats and to apply
safeguards to eliminate them or reduce the threats to
acceptable levels.

• Accountants are expected to perform in accordance

with the highest standards of professionalism as
people rely on them and their expertise.
 Part 1 - Fundamental Principles of the
code (Section 110)
(a) Integrity (Section 111): A Professional accountant
should be straight forward and honest in all professional and
business relationships. Integrity also implies fair dealing and
truthfulness.
Professional accountants should not be associated with
information that contains a materially false or misleading
statement or with information that has been furnished
recklessly.

(b) Objectivity (Section 112): A professional accountant

should not allow bias, conflict of interest or undue influence
to override professional or business judgment. In addition,
they should avoid relationships that may impair objectivity.
 Part 1 - Fundamental Principles of the
code (Section 110)
(c) Professional Competence and Due Care (Section 113): A
professional accountant should be competent to perform professional
services and should act diligently and in accordance with applicable technical
and professional standards when providing professional services
• Professional competence requires both attainment and maintenance of
professional competence which requires continuing awareness and
understanding of relevant technical professional and business
development.
• Diligence includes the responsibility to act in accordance with the
requirements of an assignment, carefully, thoroughly and on a timely
basis.
• The engagement team should have appropriate training and supervision.
The professional accountant should make the client or users of a
professional service aware of any inherent limitations in that service, to
avoid a statement of opinion being misinterpreted as fact.
 Part 1 - Fundamental Principles of the
code (Section 110)
(d) Confidentiality (Section 114): A professional accountant should respect the
confidentiality of information acquired as a result of professional and business relationships and
should not disclose any information to third parties without proper and specific authority unless
there is a legal or professional right or duty to disclose.
• Confidential information acquired as a result of professional and business relationships
should not be used for personal advantage or for the advantage of any third parties.
• There is a need to maintain confidentiality of information within the firm or employing
organization.
• The duty of confidentiality continues even after the end of the relationship between the
professional accountant and the client.
• Disclosure of information is allowed only if:
(i) permitted by law and if authorized by the client or employer
(ii) required by law i.e. in the course of legal proceedings or to appropriate public authorities
(iii) there is a professional duty or right to disclose, i.e.
– To comply with technical standards and ethical requirements;
– To protect professional interests of the accountant in a legal proceeding
– To comply with HKICPA's practice review
(iv) required to deal with an inquiry or investigation by HKICPA or other regulatory bodies
 Part 1 - Fundamental Principles of the
code (Section 110)
(e) Professional behaviour (Section 115): A professional
accountant should comply with relevant laws and regulations
and should avoid any action that discredits the profession.
• In marketing and promoting themselves, Professional
accountants should not bring the profession into disrepute.
• Professional accountants should not exaggerate claims for
their services that they offer, the qualifications they posses
or experience they have gained.
• Professional accountants should not make disparaging
references or unsubstantiated comparisons to the work of
others.
Threats and Safeguards (Section 120.6)
(a) Self-interest threats, which may occur as a result of the
financial or other interests of a professional accountant or of an
immediate or close family* member

(b) Self-review threats, which may occur when a previous

judgment needs to be re-evaluated by the professional accountant
responsible for that judgment

(c) Advocacy threats, which may occur when a professional

accountant promotes a position or opinion to the point that
subsequent objectivity may be compromised

(d) Familiarity threats, which may occur when, because of a close

relationship, a professional accountant becomes too sympathetic to
the interests of others
Threats and Safeguards (Section 120.6)
(e) Intimidation threats, which may occur
when a professional accountant may be
deterred from acting objectively by threats,
actual or perceived.