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Code of Professional Ethics
Auditing CIS
Code of Professional Ethics - Background
 Ethics - consists of moral principles and standards of conduct

 COPE - Applicable to the whole accounting profession ( private/public

accountants, auditors)

 Based on the 2016 International Code of Ethics for Professional

Accountants

 Divided into 4 parts

Segments of CoPE
Part 1
Fundamental Principles and
Conceptual Framework

Part 2,3,4
Application of the framework and
safeguards that address threats of
compliance to the Fundamental
principles
- Accountants in Business
- Public Practice
Part I - Fundamental Principles (PICPO)
 Integrity

 Objectivity

 Professional Competence and Due Care

 Confidentiality

 Professional Behavior
Independence and Objectivity

Two phases of independence:

 Independence in fact/ mind

 Independent in appearance
Conceptual Framework of COPE
1. Identify the threats to compliance with the fundamental principles

2. Evaluate the significance of the threats (material or not)

3. Apply safeguards or eliminate the effects (if possible), or reduce them

to an acceptable level
Threats to Compliance with Fundamental Principles
 Self Interest Threat

 Self Review Threat

 Advocacy Threat

 Familiarity Threat

 Intimidation Threat
Self Interest Threat
 A threat (financial or other interest) that will inappropriately
influence the professional judgement or behavior of the
accountant

 Financial Interest = either as owner, creditor, debtor capacity

Self Review Threat
 A threat that a professional accountant will not objectively
evaluate the results of the previous judgement made or service
performed in forming a conclusion about the subject matter
of the engagement
Advocacy Threat
 A threat that a professional accountant will promote a client’s
or employer’s position to the point that the professional
accountant’s objectivity is compromised.
Familiarity Threat
 A threat that a professional accountant will become too
sympathetic to the client’s work or product due to a long or
close relationship. Or the professional accountant has a close
or long withstanding relationship with the client
Intimidation Threat
 A threat that a professional accountant will be deterred from
acting objectively because of actual or perceived pressures
including attempt to exercise undue influence over the
professional accountant.
Safeguards
 These are actions or measures that may eliminate threats or
reduce them to an acceptable level

 Two types:

a. Safeguards created by the profession, legislation or regulation.

b. Safeguards in the work environment
Safeguards created by the profession, legislation or
regulation
 Education, training, and experience requirements for entry
into the profession.
 Continuing education requirements
 Corporate governance regulations
 Professional Standards, monitoring and disciplinary
processes
 External Review of firm’s QC systems (Q.E.R)
Safeguards in the work environment

 Firm-wide safeguards

 Engagement specific safeguards

 Safeguards within the client’s systems and procedures

Safeguards in the work environment

Firm-wide safeguards

 Leadership in the firm

 Policies and procedures

Safeguards in the work environment
Engagement Specific safeguards
 Review by another professional accountant - Peer Review
 Independent third-party consultation (PRC, BOA, another CPA)
 Discussion of ethical issues with those charged with governance of
the client.
 Disclosure to those charged with governance of the client the
nature of services and fees.
 Involvement of another firm to perform and re-perform the
engagement
 Rotation of senior team personnel
Safeguards in the work environment

Safeguards within the client’s systems and procedures

 Approval of appointment of the engagement is made by a
person other than the management
 Competent employees with experience and seniority to make
managerial decisions
 Clients internal control procedures in choosing non-assurance
engagement provider
 Client has corporate governance structure that has appropriate
oversight and communications regarding the firm’s services
Professional Accountant in Public Practice
Part 3 of the Code of Ethics for Professional Accountants sets out
the requirement and application material for professional
accountants in public practice
Professional Appointment

 Client Acceptance

 Engagement Acceptance

 Changes in Professional Appointment

Conflict of Interest

 Threats to objectivity

 Threats to confidentiality
Second Opinions

 Threat to professional competence and due care

Fees and other types of remuneration

 Threat to professional competence and due care

Contingent Fees

 Self interest threat to Objectivity

 Widely used in non assurance engagement

Referral Fee or Commission

 Self interest threat to Objectivity

 Self interest threat to Professional Competence and Due

care
Marketing and Professional Services

 Self Interest Threat to Professional Behavior

Gifts and Hospitality

 Self Interest Threat to Objectivity

 Intimidation Threat to Objectivity

 Familiarity Threat to Objectivity

Custody of Clients Assets

 Self Interest Threat to Objectivity

 Self interest Threat to Professional Behavior

Engagement Period

When will the independence should last?

- During the period of the engagement