Preface to the Code of

Ethics

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Preface

• Based on the revised Code of Ethics for Professional

Accountants developed by IFAC (2006 revision).

• Composed of three parts, viz:

• Part A: General Application of the Code
• Part B: Professional Accountants in Public Practice
• Part C: Professional Accountants in Business

• Approved for adoption by the PICPA, BOA and PRC.

• Took effect on or after June 30, 2008.

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 Part A:
General Application of
the Code
(Section 100 – 150)

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 Conceptual approach to Compliance
Professional Fundamental Threats to
Accountant complies with Principles threatened compliance

1. to eliminate the
1.Integrity 1.Self-interest
threats; or
2.Objectivity 2.Self-review
Safeguards include:
2. reduce3.Prof.
to an Competence 3.Advocacy
1. profession,
acceptableandlegislation
Due Careor regulation;
level. 4.Familiarity
and 4.Confidentiality 5.Intimidation
2. work environment.
5.Prof. Behavior
Identify and evaluate threats

Results
Clearly Other than CI
insignificant (CI)
Apply Decline eng’t/
Negligible threat safeguards resign

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Section 100 - Ethical Conflict
Resolution
• Consultation with appropriate persons within the
firm or employing organization.
• If involves a conflict with, or within, an
organization, consider consulting with TCWG of the
organization.
• Obtaining professional advice from the relevant
professional body or legal advisors, and guidance
on ethical issues without breaching confidentiality.
• If, after exhausting all relevant possibilities, the
ethical conflict remains unresolved, refuse to
remain associated with the matter creating the
conflict or withdraw from the engagement team or
specific assignment, or to resign.

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Section 110 - Integrity

• Imposes an obligation to be straightforward and

honest in professional and business relationships,
also implies fair dealing and truthfulness.

• Should not (unless a modified report is provided)

be associated with any information if:

• contains a materially false or misleading

statement;
• contains statements or information furnished
recklessly; or
• omits or obscures information required to be
included where such omission or obscurity would
be misleading.
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Section 120 - Objectivity

• Imposes an obligation not to compromise

professional or business judgment because of bias,
conflict of interest or the undue influence of others.

• Relationships that bias or unduly influence the

professional judgment of the professional
accountant should be avoided.

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Section 130 - Professional
Competence and Due Care
• Imposes the following obligations:
• to maintain professional knowledge and skill at
the level required to ensure that clients or
employers receive competent professional
service; and
• to act diligently in accordance with applicable
technical and professional standards when
providing professional services.

• Professional competence two separate phases:

• attainment; and
• maintenance.

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Section 140 - Confidentiality

• Imposes an obligation to refrain from:

• disclosing confidential information acquired
without proper and specific authority or unless
there is a legal or professional right or duty to
disclose; and
• using confidential information acquired to
personal advantage or the advantage of third
parties.

• Continues even after the end of relationships

between a professional accountant and a client or
employer.

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Section 140 – Confidentiality (Cont’d)

• The following are circumstances disclosure of

confidential information may be appropriate:
a. Permitted by law and is authorized by the client
or the employer;
b. Required by law, for example:
• Production of documents or evidence in the
course of legal proceedings; or
• Disclosure to the appropriate public authorities
of infringements of the law that come to light;

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Section 140 – Confidentiality (Cont’d)

c. There is a professional duty or right to disclose:

• To comply with the quality review of a member
body or professional body;
• To respond to an inquiry or investigation by a
member body or regulatory body;
• To protect the professional interests in legal
proceedings; or
• To comply with technical standards and ethics
requirements.

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Section 150 - Professional Behavior

• Imposes an obligation to comply with relevant laws

and regulations and avoid any action that may
bring discredit to the profession.

• In marketing and promoting themselves and their

work, professional accountants should not bring the
profession into disrepute. Professional accountants
should be honest and truthful and should not:

• Make exaggerated claims for the services they

are able to offer, the qualifications they possess,
or experience they have gained; or
• Make disparaging references or unsubstantiated
comparisons to the work of others.
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 Part B: Professional
Accountants in Public
Practice
(Sections 200 and 290)

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Section 200 - Introduction

• Part B, illustrates how the conceptual framework,

contained in Part A, is to be applied by professional
accountants in public practice.

• Not to engage in any business, occupation or

activity that impairs or might impair:

• integrity;
• objectivity; or
• good reputation of the profession incompatible
with the rendering of professional services.

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Section 200 – Threats to compliance
with fundamental principles
• Compliance with the fundamental principles may
potentially be threatened by a broad range of
circumstances which may fall into the following
categories:

• Self-interest (7)
• Self-review (6)
• Advocacy (2)
• Familiarity (5)
• Intimidation (3)

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Section 200 – Threats to compliance
with fundamental principles (Cont’d)
• The nature and significance of threats may differ
depending on whether they arise from services to:

• a Financial Statements (FSs) audit client

• a non-FSs audit assurance client
• a non-assurance client.

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Self-interest threats

• Examples of circumstances that may create self-

interest threats include, but are not limited to:

1. A financial interest in a client or jointly holding a

financial interest with a client.
2. A loan to or from an assurance client or any of
its directors or officers
3. Undue dependence on total fees from a client.
4. Having a close business relationship with a
client.
5. Concern about the possibility of losing a client.
6. Potential employment with a client.
7. Contingent fees relating to an assurance
engagement.
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Self-review threats

• Examples of circumstances that may create self-

review threats include, but are not limited to:

1. The discovery of a significant error during a re-

evaluation of the work of the professional
accountant in public practice.
2. Reporting on the operation of financial systems
after being involved in their design or
implementation.
3. Having prepared the original data used to
generate records that are the subject matter of
the engagement.

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Self-review threats (Cont’d)

4. A member of the assurance team being, or

having recently been, a director or officer of that
client.
5. A member of the assurance team being, or
having recently been, employed by the client in
a position to exert direct and significant
influence over the subject matter of the
engagement.
6. Performing a service for a client that directly
affects the subject matter of the assurance
engagement.

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Advocacy threats

• Examples of circumstances that may create

advocacy threats include, but are not limited to:

1. Promoting shares in a listed entity when that

entity is a financial statement audit client.
2. Acting as an advocate on behalf of an assurance
client in litigation or disputes with third parties.

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Familiarity threats

• Examples of circumstances that may create

familiarity threats include, but are not limited to:

1. A member of the engagement team having a

close or immediate family relationship with a
director or officer of the client.
2. A member of the engagement team having a
close or immediate family relationship with an
employee of the client who is in a position to
exert direct and significant influence over the
subject matter of the engagement.

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Familiarity threats (Cont’d)

3. A former partner of the firm being a director or

officer of the client or an employee in a position
to exert direct and significant influence over the
subject matter of the engagement.
4. Accepting gifts or preferential treatment from a
client, unless the value is clearly insignificant.
5. Long association of senior personnel with the
assurance client.

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Intimidation threats

• Examples of circumstances that may create

intimidation threats include, but are not limited to:

1. Being threatened with dismissal or replacement

in relation to a client engagement.
2. Being threatened with litigation.
3. Being pressured to reduce inappropriately the
extent of work performed in order to reduce
fees.

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Section 200 – Safeguards against
threats
• Safeguards that may eliminate or reduce threats to
an acceptable level fall into two broad categories:

• Safeguards created by the profession, legislation

or regulation; and
• Safeguard in the work environment.

• Work environment safeguards comprise:

• firm-wide safeguards; and

• engagement specific safeguards

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Safeguards created by the profession,
legislation or regulation
• Safeguards created by the profession, legislation or
regulation include, but are not restricted to:

• Educational, training and experience

requirements for entry into the profession.
• Continuing professional development
requirements.
• Corporate governance regulations.
• Professional standards.
• Professional or regulatory monitoring and
disciplinary procedures.
• External review of a prof. accountant’s work.

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Section 290 – Independence—
Assurance Engagements
Non-audit Non-audit
Audit (Unrestricted (Restricted
report) report)
The members
of the
Yes Yes Yes
assurance
team
The firm Yes Yes No
Network firms Yes No No

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Questions?

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Thank you!!!

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