Ethics and The Accountancy Profession: The Duties of Man To Society

Ethics and
the Accountancy Profession
The Duties of Man to Society

Code of Ethics for
Professional Accountants
ICPAK and IFAC

Basic Structure of the Codes of Ethics
for Accountants
 Introduction
 Fundamental Principles/Broad
principles
 Specific application of the principles to

professional practice
Basic Structure of the Codes of Ethics
for Accountants
 Introduction
 Broad principles – general guidelines
 ICPAK: Fundamental principles

 IFAC: General application of the code
 Specific application of the principles to professional

practice – more specific guidelines are given to
accountants
 ICPAK: Statements and Explanatory Notes

 IFAC: Guidelines to Professional Accountants in Public Practice
and in Business
Code of Professional Ethics IFAC
CONTENTS
 PART A: GENERAL APPLICATION OF THE CODE
 Introduction and Fundamental Principles

 Integrity
 Objectivity
 Professional Competence and Due Care
 Confidentiality
 Professional Behavior
Code of Professional Ethics
PART B: PROFESSIONAL ACCOUNTANTS IN PUBLIC

PRACTICE
 Professional Appointment
 Conflicts of Interest
 Second Opinions
 Fees and Other Types of Remuneration
 Marketing Professional Services
 Gifts and Hospitality
 Custody of Clients Assets
 Independence–Assurance Engagements
PART C: PROFESSIONAL ACCOUNTANTS IN
BUSINESS
 Potential Conflicts
 Preparation and Reporting of Information
 Acting with Sufficient Expertise
 Financial Interests
 Inducements
Code of Ethics for
ICPAK
PROFESSIONAL ETHICS
The Code of Professional Ethics of ICPAK gives a

summary of the accountants duties to the profession in
the form of four fundamental principles:
 Duty of Integrity
 Duty of Professional Competence
 Duty of Courtesy and Respect
 Duty to uphold the dignity of the profession
PROFESSIONAL ETHICS
Duty of Integrity:
 In accepting or continuing a professional

assignment or occupation, a member should always
have regard to any factors which might reflect
adversely upon his integrity and objectivity in
relation to that assignment or occupation.
PROFESSIONAL ETHICS
Duty of Professional Competence:
 A member should carry out his professional work

with a proper regard for the technical and
professional standards expected of him as a
member
 He should not undertake or continue professional

work which he himself is not competent to perform
unless he obtains such advice and assistance as will
enable him to carry out his task competently.
PROFESSIONAL ETHICS
Duty of Courtesy and Respect:
 A member should conduct himself with courtesy and

consideration towards all with whom he comes into
contact in the course of his professional work in
order to maintain the dignity and standing of the
profession.
PROFESSIONAL ETHICS
Duty to uphold the dignity of the profession:
 A member should follow the ethical guidelines of the

Institute
 and in circumstances not provided for by that

guidance, he should conduct himself in a manner
consistent with the reputation of the profession and
of the Institute.
Code of Ethics for
International Federation of
Accountants (IFAC)
Mission of the International Federation of Accountants
 To serve the public interest
 To strengthen the worldwide accountancy profession
 To contribute to the development of strong international

economies
 To establish and promote adherence to high-quality

professional standards
 The Code of Ethics for Professional Accountants has been

prepared by the Ethics Committee of the International
Federation of Accountants.
Introduction
 A distinguishing mark of the accountancy

profession is its acceptance of the responsibility to
act in the public interest.
 Therefore, a professional accountant’s*

responsibility is not exclusively to satisfy the needs
of an individual client or employer.
 In acting in the public interest a professional

accountant should observe and comply with the
ethical requirements of this Code.
Fundamental Principles
 (a) Integrity
A professional accountant should be

straightforward and honest in all professional
and business relationships.
 (b) Objectivity
A professional accountant should not allow bias,

conflict of interest or undue influence of others to
override professional or business judgments.
 (c) Professional Competence and Due Care
A professional accountant has a continuing duty to

maintain professional knowledge and skill at the level
required to ensure that a client or employer receives
competent professional service based on current
developments in practice, legislation and techniques.
A professional accountant should act diligently and

in accordance with applicable technical and
professional standards when providing professional
services.
 (d) Confidentiality
A professional accountant should respect the

confidentiality of information acquired as a result of
professional and business relationships.
He should not disclose any such information to third

parties without proper and specific authority unless
there is a legal or professional right or duty to
disclose.
 (d) Confidentiality
Confidential information acquired as a result of

professional and business relationships should not
be used for the personal advantage of the
professional accountant or third parties.
 (e) Professional Behavior
A professional accountant should comply with

relevant laws and regulations and should avoid any
action that discredits the profession.
BROAD PRINCIPLES
SPECIFIC APPLICATION TO PROFESSIONAL

PRACTICE
BROAD PRINCIPLES : INTEGRITY/OBJECTIVITY
SPECIFIC APPLICATION TO PROFESSIONAL PRACTICE
What should an accountant do or not do to ensure his

integrity and objectivity are not compromised?
The codes will give specific guidelines.

Code of Professional Ethics ICPAK
BROAD PRINCIPLES : INTEGRITY/OBJECTIVITY
SPECIFIC APPLICATION TO PROFESSIONAL PRACTICE
“A member in public practice should be, and be

seen to be, free of any interest which might detract
from objectivity.
He must be impartial and must not allow prejudice

or bias to affect his judgment.”
Specific Guidelines to Accountants to maintain
objectivity
ICPAK sets out these guidelines in the form of

explanatory notes
 Professional independence is a concept fundamental to

the accountancy profession. It is essentially an attitude
of the mind characterized by integrity and an objective
approach to professional work.
 A member should recognize the problems created by

interpersonal relationships or financial involvement
which by reason of their nature or degree may threaten
this objectivity.
 For a member in practice, he should not derive too
great a part of his professional income from one client
(a new practice may not, in the short term, be able to
comply with this criterion).
 Family and personal relationships can affect objectivity.

An accountant should ensure that his objective
approach to any assignment is not endangered as a
consequence of any personal relationship.
 A practice should ensure that it does not have as an

audit client a company in which a partner in the
practice, the spouse or minor child of such a partner, is
the beneficial holder of shares, nor…
 If shares in an audit client are involuntarily acquired (e.g. a
partner inherits the shares or marries a shareholder, or the
company is taken over by a company in which the partner
owns shares), the shares should be disposed of at the
earliest practicable date- these shares should not be used
in relation to the appointment of the auditor at the AGM.
 If a partner owns shares in a company and the company

becomes an audit client, the partner should sell the shares
as soon as possible. However, these rules do not apply
when the partner has a deposit with a financial institution or
building society on terms available to the general public or
an investment in loan stocks in a public utility corporation.
 A practice should not have as an audit client a public
company if a partner in the practice, or the spouse of a
partner, is a trustee of a trust holding shares in that company
and the holding is in excess of 10% of the issued share capital
of the company or in excess of 10% of the total assets in the
trust.
 If the trust owns 10% or less of the issued share capital, the
partner who is a trustee or is a spouse of the trustee should
not take part personally in the audit; and the shareholding
should be disclosed in the accounts or in the directors’
report. In the case of a private company, the shareholding
should be disclosed. This rule does not apply when the
partner is a trustee of an approved charity.
 A practice, a partner, the spouse or child of the
partner should not make a loan to a client, nor
guarantee a client’s borrowings, nor accept a loan
from a client or have borrowings guaranteed by a
client; this does not apply to a practice having a
current or deposit account with a client commercial
bank or similar financial institutions.
 A partner, his spouse and minor children, and the

staff of a practice should not accept goods or
services from a client or under hospitality.
 Where conflicts of interest arise, there should be a full and

frank explanation to those involved, coupled with any action
necessary to disengage from one or both positions (e.g.
advising two companies tendering for the same contract, or
where clients are in dispute with one another).
 A practice should not report on a company if a partner or

employee of the practice is an officer or employee of the
company.
 Whenever a practice is asked to accept an appointment,

consideration will need to be given to whether acceptance
might give rise to a situation in which independence may be
compromised whether by a prospective conflict of interest or
otherwise.
Specific Guidelines related to:
 Professional Appointment
 Fees and Other Types of Remuneration
 Marketing Professional Services
 Gifts and Hospitality
 Custody of Clients Assets
Advertising and publicity
 A member may seek to promote the services they

offer through advertising or other means so long as
this is consistent with the dignity of the profession
and it does not project an image inconsistent with
that of a professional person bound to high ethical
and technical standards.
Solicitation of clients
 A member should not in any circumstances obtain or seek

professional work for himself or another member in any
unprofessional manner.
 A practising member should not give any commission, fee or

reward to a third party, other than a person who holds a practising
certificate, a retired partner or a legal representative of such a
partner, in return for the introduction of a client.
 No member in practice shall comply with any request from a firm

or company who is not a client of that firm to submit a quotation
for audit fees unless the existing auditors are aware that such a
request has been made by their client.
Changes in Professional Appointment
 A CPA shall respect the right of a client to appoint whom he

wishes to carry out professional work.
 A member who is asked to accept nomination as auditor

should:
request the prospective client’s permission to communicate

with the auditor last appointed. If such permission is refused he
should decline nomination.
on receipt of permission, request in writing of the auditor last

appointed all information which ought to be made available to
him to enable him to decide whether he is prepared to accept
nomination.
 A member receiving such request should:
request permission of the client to discuss the client’s affairs

freely with the proposed nominee. If this request is not
granted the member should report that fact to the proposed
nominee, who, if a member, should not accept nomination.
on receipt of permission from the client, he should disclose

fully all information needed by the nominee to enable him to
decide whether to accept nomination.
 Fees
The independence of judgment of the member should not be

impaired by the hope of financial gain. Hence any basis of
fees which may influence the accountant’s judgment or
findings or may even subject him in the public mind to
suspicion is to be excluded.
ENRON and Arthur Andersen

 Clients’ monies
A member in practice is strictly accountable for all clients’

monies received by him. Such monies should be kept
separate from all other monies in his hands to be applied only
for the purposes of the client.

Ethics and The Accountancy Profession: The Duties of Man To Society

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Ethics and The Accountancy Profession: The Duties of Man To Society

Uploaded by

Copyright:

Available Formats

Ethics and

the Accountancy Profession

The Duties of Man to Society

ICPAK and IFAC

 Specific application of the principles to

 Broad principles – general guidelines

 ICPAK: Fundamental principles

 Specific application of the principles to professional

 ICPAK: Statements and Explanatory Notes

 PART A: GENERAL APPLICATION OF THE CODE

 Introduction and Fundamental Principles

PART B: PROFESSIONAL ACCOUNTANTS IN PUBLIC

The Code of Professional Ethics of ICPAK gives a

 In accepting or continuing a professional

 A member should carry out his professional work

 He should not undertake or continue professional

Duty of Courtesy and Respect:

 A member should conduct himself with courtesy and

Duty to uphold the dignity of the profession:

 A member should follow the ethical guidelines of the

 and in circumstances not provided for by that

 To serve the public interest

 To strengthen the worldwide accountancy profession

 To contribute to the development of strong international

 To establish and promote adherence to high-quality

 The Code of Ethics for Professional Accountants has been

 A distinguishing mark of the accountancy

 Therefore, a professional accountant’s*

 In acting in the public interest a professional

A professional accountant should be

A professional accountant should not allow bias,

 (c) Professional Competence and Due Care

A professional accountant has a continuing duty to

A professional accountant should act diligently and

A professional accountant should respect the

He should not disclose any such information to third

Confidential information acquired as a result of

 (e) Professional Behavior

A professional accountant should comply with

SPECIFIC APPLICATION TO PROFESSIONAL

BROAD PRINCIPLES : INTEGRITY/OBJECTIVITY

SPECIFIC APPLICATION TO PROFESSIONAL PRACTICE

What should an accountant do or not do to ensure his

The codes will give specific guidelines.

BROAD PRINCIPLES : INTEGRITY/OBJECTIVITY

SPECIFIC APPLICATION TO PROFESSIONAL PRACTICE

“A member in public practice should be, and be

He must be impartial and must not allow prejudice

ICPAK sets out these guidelines in the form of

 Professional independence is a concept fundamental to

 A member should recognize the problems created by

 Family and personal relationships can affect objectivity.

 A practice should ensure that it does not have as an

 If a partner owns shares in a company and the company

 A partner, his spouse and minor children, and the

 Where conflicts of interest arise, there should be a full and

 A practice should not report on a company if a partner or

 Whenever a practice is asked to accept an appointment,

Specific Guidelines related to:

 A member may seek to promote the services they

 A member should not in any circumstances obtain or seek

 A practising member should not give any commission, fee or