Fundamental ethical and

professional principles

The Association of Chartered Certified Accountants

Contents
• Learning objectives
• Background of the code of ethics and conduct
• ACCA code of ethics and conduct
• Consequences of breaching the code of conduct
Fundamental
ethical and Learning Objectives

professional
principles
Fundamental ethical and professional principles
Learning Objectives (LOs)
• Appraise and discuss the importance of ethical and professional behaviour
in complying with accounting standards and corporate reporting
requirements
• Assess and discuss the consequences of unethical behaviour by
management in carrying out their responsibility for preparation of
corporate reports
Fundamental
ethical and Background of the Code

professional
of Ethics and Conduct

principles
Fundamental ethical and professional principles
What is code of professional ethics and conduct ?
• The Code sets out fundamental principles of ethics for professional accountants, reflecting the
profession’s recognition of its public interest responsibility. These principles establish the
standard of behavior expected of a professional accountant.

Who developed the code?

• The International Ethics Standards Board for Accountants (IESBA) developed the International
Code of Ethics for Professional Accountants.

Link to ACCA ?
• ACCA has adopted the International Code of Ethics for Professional Accountants (including International
Independence Standards), issued by the International Ethics Standards Board for Accountants (IESBA).
However, the IESBA Code is augmented with additional requirements and guidance that are appropriate
to ACCA and its members.
Fundamental ethical and professional principles
Who should follow the code ?
• ACCA registered students, affiliates and members are required to observe proper standards of
conduct. The Code applies to all ACCA registered students, affiliates and members in relation to
all matters connected to their professional lives.

Non-compliance with the code

• An ACCA registered student, affiliate or member who fails to comply with this Code (incorporating
the IESBA code) will be liable to disciplinary action. Two committees have been appointed by
Council to enforce ACCA’s ethical standards: Disciplinary Committee and Appeal Committee. The
committees derive their powers from the bye-laws. Those failing to observe the standards
expected of them may be required to answer a complaint before ACCA’s Disciplinary Committee.
Fundamental
ethical and ACCA Code of Ethics and

professional
Conduct

principles
Fundamental ethical and professional principles
ACCA Code of ethics
and conduct

Section A Section B Section C

IESBA Code Supplementary requirements and guidance

Professional Professional
Part 1 , 2 & 3
accountants in accountants in
public practice business
Part 4A & 4B
IESBA Code of ethics International Independence standards
Fundamental ethical and professional principles
IESBA Code of ethics
• Part 1 – Complying with the code, fundamental principles and conceptual framework
• Part 2 – Material that applies
− to professional accountants in business when performing professional activities
− to individuals who are professional accountants in public practice when performing
professional activities pursuant to their relationship with the firm, whether as a contractor,
employee or owner.
• Part 3 – Material that applies to professional accountants in public practice when performing
professional services

International Independence standards

• Part 4A – Independence for audit and review engagements
• Part 4B – Independence for assurance engagements other than audits and review engagements
Fundamental ethical and professional principles
Ethics vs Financial Reporting
International Financial Reporting Standards are mostly principle based. This requires the
professional judgement of an accountant to be exercised in certain circumstances. As a result, the
application of professional judgement could create ethical challenges due to different interests
vested in the parties prepare / use the financial statements.
Fundamental principles of ethics for professional accountants

Integrity Professional Confidentiality

competence
and due care Professional
Objectivity
behaviour
Fundamental ethical and professional principles
Integrity
To be straightforward and honest in all professional and business relationships

Objectivity
To not allow bias, conflict of interest or undue influence of others to override professional or business judgement

Situations that could impair the integrity and objectivity

• Situations where the accountant’s incentives is linked to the financial performance.
• Where significant judgments are used in measuring the values (Fair value measurements, etc.)
• Where the organizations financing depends on the performance
• Additional pressure by the staff on accountant on the profit targets that could have an impact to
the staff bonuses etc.
Fundamental ethical and professional principles
Ethical Reporting vs Profits
Knowledge Check
Company A, operating in the trading business is in a financial difficulty. The
negotiated financing arrangement specifies a minimum amount of a revenue to
be earned by the Company to be eligible to the financing facility. The CEO of the
Company is of the view that recognizing the revenue related to the subsequent
financial year (cut off manipulation) could achieve the set target and insists the
accountant to recognize this portion of the revenue prematurely.

• Explain the CEO about the revenue recognition requirements under IFRS 15.
• May contact ACCA helpline and could take legal advice on future actions.
Fundamental ethical and professional principles
Professional competence and due care
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 and act
diligently and in accordance with applicable technical and professional
standards.

Continuing professional development (CPD) is a key to achieve the objective. It is important for the
professional accountants to
• Read technical articles
• Attend seminars / conferences etc.
• Attend training courses
Where relevant professional accountant shall make clients, the employing organization, or other
users of the accountant’s professional services or activities, aware of the limitations inherent in the
services or activities.
Fundamental ethical and professional principles
Confidentiality
To respect the confidentiality of information acquired as a result of professional and
business relationships and therefore, 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, nor use the information for the personal advantage of the
professional accountant or third party.

Insider trading
Illegal practice of trading on the stock exchange to one’s own advantage through having access to
confidential information.

Eg: Auditor / finance director having information about a potential increase in the share prices
immediately purchases shares at lower value with the intention of selling the shares subsequently at a
higher value.
Fundamental ethical and professional principles
Professional behaviour
To comply with relevant laws and regulations and avoid any action that discredits
the profession.
A professional accountant shall not knowingly engage in any business, occupation
or activity that impairs or might impair the integrity, objectivity or good reputation of
the profession, and as a result would be incompatible with the fundamental
principles.
Fundamental
ethical and Consequences of
breaching the code of

professional conduct

principles
Fundamental ethical and professional principles
Possible consequences
An ACCA registered student, affiliate or member who fails to comply with this Code
(incorporating the IESBA code) will be liable to disciplinary action. Two committees
have been appointed by Council to enforce ACCA’s ethical standards: Disciplinary
Committee and Appeal Committee. The committees derive their powers from the
bye-laws. Those failing to observe the standards expected of them may be
required to answer a complaint before ACCA’s Disciplinary Committee.

• Fines
• Loss of professional reputation
• Prevention to act as a director / officer of a public company
• Possibility of being expelled from the professional accounting body
• Prison sentence
Thank you