PROFESSIONAL ETHICS AND

CONDUCT OF AN AUDITOR AND

ACCOUNTANTS.
TOPIC COVERAGE:
• Definition of Code of Ethics.
• Importance of having code of ethics for professional
Accountants.
• Ways to enhance Code of ethics.
• Principles of professional Code of ethics.
• Threats to Integrity, Objectivity & Independence
Code of Ethics

• Are sets of professional standards to guide the behavior

of an organization's members.
• Are the ethical Principles that accountant and
auditors should follow when performing professional
assignment.
•Ethics require accounting professionals to comply with
the laws and regulations that govern their
jurisdictions/authority and their bodies of work.
Importance of Code of Ethics

• Provide criteria for Disciplinary action/measures to

accounting regulating board. Disciplinary measures can be
Fines, Penalties or can be audit/Accounting firm de-
registration of suspension.
• Provide distinguished mark to the profession, professional
accountant will have a unique way of behaving.
• It enhances confidence to the public through integrity and
objectivity. The public can have faith on the work of the
accountant.
Importance of Code of Ethics
• It guides acceptance of professional assignment. Auditors
engaged by a new client have to observe pre-engagement
activities, among other factors is the ethical requirement of the
profession. Auditors have to assess whether there is any potential
threat to independence.
• Decrease in Fraud and other unfaithful activities. Through
compliance with integrity, free from undue influence,
confidentiality, unfaithful activities are minimized when
conducting professional assignments.
Ways to enhance code of ethics

Through Education and Training: - Provide knowledge, Skills &

Experience to practitioners in Auditing and Accounting. In other words, it
improves competence.
Through rewarding and sanctions: - Rewarding means appreciation e.g.
NBAA issue a price for best presented financial statement during
Accountants Annual conference.
Sanctions to discourage bad behavior so as to enhance a good behavior. For
accountant
• /Auditors who violate the ethical requirement sanctions should be
imposed e.g de- register from CPA list by NBAA, Fines or Penalties.
Through consultation: - For challenges that face the
accountants and auditors, especially on ethical matters,
consultation can be made with Regulatory Board or other
experienced Accountants to resolve the challenge of ethics.
Through Professional Mentoring and Evaluation: - NBAA as a
regulatory board for accounting & Auditing profession normally
conducts periodic review to check on compliance with ethical
and other requirements in accordance with IFRS/ISAs or
International code of ethics.
PRINCIPLES OF PROFESSIONAL ETHICS FOR
PROFESSIONAL ACCOUNTANTS & AUDITORS (IFAC
CODE OF ETHICS)

Also referred to as Quality of a Professional Accountant i.e.:

• Integrity
• Confidentiality
• Professional competence and due care
• Objectivity
• Professional behavior
CONFIDENTIALITY:
• Accountants are required to respect the confidentiality of information
acquired as a result of professional and business relationship.
• Not to use confidential information acquired as a result of
professional and business relationship for personal advantage or
advantage of a third party.
• A professional accountant should not disclose confidential
information relating to previous client, Present or prospective client
or employer without proper authority to disclose them.
CIRCUMSTANCES TO DISCLOSE
CONFIDENTIAL INFORMATION
• Client Permission is given:
• To protect member’s Interest e.g. shareholders of the
company
• To protect Public Interest e.g. when a client is a
terrorist
• When it is a professional Duty i.e. if required by Law,
for example enquiry from TRA or immigration.
MATTERS TO CONSIDER BEFORE
DECIDING TO DISCLOSE
CONFIDENTIAL INFORMATION
• Obtain Legal Advice:-
To avoid financial and reputation repercussion.
• Appropriate types of communication to intended recipient.
• Likelihood of repetitions.
INTEGRITY
• Requires members to be straightforward and honest in all
professional and business relationship.
• It implies fair dealing and truthfulness e.g Issuing unmodified
report while modified report is appropriate, this is against
integrity
• Accountants shall not knowingly be associated with reports,
returns or communications that contains material false or
misleading statement.
OBJECTIVITY:
• Requires professional accountants not to compromise
professional or business judgement because of bias, conflict
of interest or undue influence of others. E.g.. Considering
personal or financial influences during the audit.
• Professional Judgement: Is the application of knowledge and
experience in making informed decisions about the
appreciate course of action in the circumstances of the client
engagement.
PROFESSIONAL COMPETENCE AND
DUE CARE:
• To attain and maintain professional knowledge and
skills at the level required to ensure that a client or
employing organization receives competent
professional services, based on current technical and
professional standards and relevant legislation.

• Act diligently and in accordance with applicable

technical and professional standards.
PROFESSIONAL BEHAVIOR
• A professional accountant is required to comply with
relevant laws and regulations and avoid any conduct that the
professional accountant knows or should know might
discredit the profession.
• A professional accountant shall not knowingly engage in any
business, occupations 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.
THREATS TO INTEGRITY, OBJECTIVITY
AND INDEPENDENCE
a) Self Interest threat
b) Self-Review threat
c) Familiarity threat
d) Advocacy threat
e) Intimidation threat
SELF INTEREST THREAT
• Is a threat arises when an auditor or close family
member of an auditor has a financial or other
beneficial interest in client. E.g.. An Auditor own
shares to a client’s business, Personal & Family
relationship.
SELF REVIEW THREAT
• Is a threat arises when an auditor Redo or
Reevaluate the work that their colleagues have
already performed, arises when an auditor
provides non – Audit services to clients. E.g.
Book keeping services &Tax consultation services
FAMILIARITY THREAT
• Is a threat arises when the relationship between an
Auditor and client goes beyond the professional
boundaries i.e. Auditor becomes too sympathetic with
client interest and this erodes professional skepticism
of an auditor or Arises when Auditor become close
family member of client.
E.g. Personal & Family relationship between Assurance
members & audit client.
ADVOCACY THREAT
• Is a threat arises when an auditor represents a
clients in legal or others matters.
• Examples/ Circumstances for Advocacy threat A
position of a company’s secretary in a company,
where duties involve; Maintain records and
register of a company.
INTIMIDATION THREAT
• Is a threat arises when an auditor perform audit work
with direct or indirect form of threat from the client.
Example of direct threat may be physical threat.
• Indirect threat are threat made by implications i.e.
overdue fees from previous assignment/ client
threaten to sue the audit firm from previous work.
SAFEGUARD TO THREATS OF
INTEGRITY, OBJECTIVITY AND
INDEPENDENCE
1.Safeguard created by Professional Body (Regulation & Legislation)
2. Safeguard created by work environment (Audit firm).
3. Safeguards created by individuals
SAFEGUARD CREATED BY
PROFESSIONAL BODY (REGULATION &
LEGISLATION)
a) Code of ethics issued by professional bodies
b) Professional standards issued by professional bodies
c) CPD program i.e. Seminar & Workshop conducted by professional
bodies
d) Disciplinary measures taken by professional bodies against unethical
members. E.g. Fines and Penalties.
e) Environment legislation e.g. By-law of NBAA
SAFEGUARD CREATED BY WORK
ENVIRONMENT (AUDIT FIRM).
a) Establish strong controls i.e Quality Review
b) Training of Employees
c) Consultation for each other
d) Disciplinary action for Accountants/ Auditors who are unethical.
e) Team member rotation/engagement partner. f) Establish good
organization culture.
SAFEGUARDS CREATED BY
INDIVIDUALS.
a) Attend CPD program
b) Comply with code of ethics.
c) Comply with professional standards

* CPD – Continuing professional development

The end.