Auditing theory
181. Responsible Citizenship
Obey just laws; if all law is unjust, openly
protest it, exercise all democratic rights and
privileges responsibly by participation (voting and
expressing informed views), social consciousness,
and public service; when in a position of leadership
or authority, openly respect and honor democratic
processes of decision making, avoid unnecessary
secrecy or concealment of information, and assure
that others have all the information they need to
make intelligent choices and exercise their rights.
182. Pursuit of Excellence
Pursue excellence in all matters, in meeting
your personal and professional responsibilities, be
diligent, reliable, industrious, and committed;
perform all tasks to the best of your ability, develop
and maintain a high degree of competence, be well
informed and well prepared; do not be content with
mediocrity; do not “win at any cost.”
183. Accountability
Be accountable, accept responsibility for
decisions, for the foreseeable consequences of
actions and inactions, and for setting an example of
others. Parents, teachers, employers, many
professionals, and public officials have a special
obligation to lead by example, to safeguard and
advance the integrity and reputation of their
families, companies, profession, and the
government itself; an ethically sensitive individual
avoids even the appearance of impropriety, and
takes whatever actions are necessary to correct or
prevent inappropriate conduct of others.
CODE OF ETHICS FOR PROFESSIONAL
ACCOUNTANTS IN THE PHILIPPINES
Fundamental Principles of Ethics
186. Integrity
To be straightforward and honest in all
professional and business relationships.
187. Objectivity
To prevent bias, conflict of interest or undue
influence of others to override professional and
business judgments.
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188. 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.
189. Confidentiality
To respect the confidentiality of information
acquired as a result of professional and business
relationships and 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, nor use the
information for the personal advantage of the
professional accountant or third parties.
190. Professional Behavior
To comply with relevant laws and
regulations and avoid any action that discredits the
profession.
191. Threats to Compliance with Fundamental
Principles
When a professional accountant identifies
threats to compliance with the fundamental
principles and based on an evaluation of those
threats, determines that they are not at an
acceptable level, the professional accountant shall
determine whether appropriate safeguards are
available and can be applied to eliminate the threats
or reduce them to an acceptable level.
Categories of Threats
193. Self-Interest Threat
It refers to the threat that financial or other
interest will inappropriately influence the
professional accountant’s judgment or behavior.
194. Self-Review Threat
It pertains to the threat that a professional
accountant will not appropriately evaluate the
results of a previous judgment made or service
performed by the professional accountant, or by
another individual within the professional
accountant’s firm or employing organization, on
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which the accountant will rely when forming a
judgment as part of providing a current service.
195. Advocacy Threat
It is the 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.
196. Familiarity Threat
It refers to the threat that due to a long or
close relationship with a client or employer, a
professional accountant will be too sympathetic to
their interests or too accepting of their work.
197. Intimidation Threat
It pertains to the threat that a professional
accountant will be deterred from acting objectively
because of actual or perceived pressures, including
attempts to exercise undue influence over the
professional accountant.
198. Safeguards against Threats to Compliance
with Fundamental Principles
Safeguards are actions or other measures
that may eliminate threats or reduce them to an
acceptable level.
Categories of Safeguards that May Eliminate or
Reduce Threats to an Acceptable Level
200. Safeguards Created by the Profession,
Legislation or Regulation
a. Educational, training and experience
requirements for entry into the
profession;
b. Continuing professional development
requirements;
c. Corporate governance regulations;
d. Professional standards;
e. Professional or regulatory monitoring
and disciplinary procedures; and
f. External review by a highly empowered
third party of the reports, returns,
communications or information
produced by a professional accountant.
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201. Safeguard in the Work Environment
a. Leadership of the firm that stresses the
importance of compliance with
fundamental principles;
b. Leadership of the firm that establishes
the expectation that the members of an
assurance team will act in the public
interest;
c. Policies and procedures to implement
and monitor quality control of
engagements;
d. Documented policies regarding the:
• Identification of threats to
compliance;
• Evaluation of the significance of
those threats;
• Application of safeguards to
eliminate or reduce the threats to
an acceptable level; and/or
• Termination or decline of the
relevant engagement when
appropriate safeguards are not
available or cannot be applied;
e. Documented internal policies and
procedures requiring compliance with
the fundamental principles;
f. Policies and procedures that will enable
the identification of interests or
relationships between the firm or
members of engagement teams and
clients; and
g. Others
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202. Conflicts of Interest
It refers to a situation in which the concerns
or aims of two different parties are incompatible. An
example relevant to the work of a professional
accountant would be: “Advising two clients at the
same time who are competing to acquire the same
company where the advice might be relevant to the
parties’ competitive position.”
203. Second Opinions
It arises when a member or member firm
agrees to give professional advice to a third party in
connection with any matter that has, or might be
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expected to have been, considered by that party's 209. Certificate of Accreditation
auditors. There may be a threat to professional Is issued to certified public accountants in
competence and due care in circumstances where public practice only upon showing, in accordance
the second opinion is not based on the same set of with rules and regulations promulgated by the
facts that were made available to the existing Board (BOA) and approved by the Commission
auditor, or is based on inadequate evidence. (PRC), that such registrant has acquired a minimum
of three (3) years meaningful experience in any of
204. Independence the areas of public practice including taxation.
It refers to the auditor’s independence from
the client company ensuring that the audit opinion 210. Organization of CPA Firms
will not be influenced by any relationship existing
between them. a. Sole proprietorships
b. Partnerships
Aspects of Independence
206. Independence of Mind
It pertains to the state of mind that permits
the expression of a conclusion without being
affected by influences that compromise
professional judgment, allowing an individual to act
with integrity, and exercise objectivity and
professional skepticism.

207. Independence in Appearance

It pertains to the avoidance of facts and
circumstances that are so significant that a
reasonable and informed third party, having
knowledge of all relevant information, including
safeguards applied, would reasonably conclude a
firm’s, or a member of the assurance team’s,
integrity, objectivity or professional skepticism had
been compromised.
***

208. Network and Network Firms

An accounting network or accounting
association is a professional service network
whose principal purpose is to provide members
resources to assist the clients around the world and
hence reduce the uncertainty by bringing together a
greater number of resources to work on a problem.
The networks and associations operate
independently of the independent members. The
largest accounting networks are known as the Big
Four.