Q Introduction € Mmnovatne’ Q The Fundamental Principles of Ethics 1. Integrity 2. Objectivity 3. Professional competence and due care 4. Professional Behaviour 5. Confidentiality O Threats to Compliance with Fundamental Principles 1. Self-interest; 2. Self-review; 3. Advocacy; 4. Familiarity; and 5. Intimidation. O Applicability of the Codeaecece latte) Ethics can be difficult to define but it I principally concerned with moral principles, character and conduct. Ethical behaviour is more than obeying laws, rules and regulations. It is about doing ‘the right thing’ A distinguishing mark of accountancy profession is its acceptance of the responsibility to act ethically and in the public interest. Professional accountants may find themselves in situations where values are in conflict with one another due to rezponzibilities to employers, clients and the public. ICAP has a code of conduct which members, students, affiliates, employees of member firms and, where applicable, member firms must follow. The code is called ‘Code of Ethics for Chartered Accountants (Revised 2019) and it provides guidance in situations where ethical issues arice.Aaecere cl Impact on members All members of ICAP are required to comply with the code of ethics. The code applies to both accountants in practice and in buzineze. ICAP Code of ethics has been bifureated into following parts: O Part 4: complying with the Code, Fundamental Principles and Conceptual Framework (All Chartered Accountants) 1 Part 2: Chartered Accountants in Business 1 Part 3: Chartered Accountants in Practice O Part 4A - Independence for Audit and Review Engagements 01 Part 48 - Independence for Assurance Engagements other than Audit and ReviewBad Late cu cla diced ccek east ule There are five fundamental principles of ethics for chartered accountants Integrity Objectivity 1 3 3. Professional competence and due care 4. Profezcional sehaviour 5 ConfidentialityUa ile cu CULM dite keke uLoed Important points A chartered accountant shall comply with each of the fundamental principles. A chartered accountant might face a situation in which complying with one fundamental principle eonfilets with complying with one or more other fundamental principles In such a situation, the accountant might consider consulting, on an anonymous basis if necessary, with: OD Others within the firm or employing organization. Those charged with governance. © A professional body. 1D A regulatory body. O Legal counsel. However, uch consultation does not relieve the accountant from the responsibility to exercise professional judgment to resolve the conflict or, if necessary, and unless prohibited by law or regulation, disassociate from the matter creating the conflict.‘An accountant is required to be straightforward and honest in all profe: business relationships ional and Integrity implies fair dealing and truthfulness, A chartered accountant should not be knowingly associated with reports, returns, communications or other information where they believe that the information: Q contains a materially false or misleading statement; D1 Contains statements or information furnished recklessly; or D Omits or obscures information required) to be included where such omission or obscurity would be misleading When a chartered accountant becomes aware of having been associated with misleading or false information, the accountant shall take cteps to be disassociated from that infermation, ‘You are Director of Accounting Policy for an r international manufacturing company: INTEcRITy The CEO has outlined a new business proposal to supposed to comply with local bribery and corruetion laws, but you are not sure everyone would agree with this assessment forbulaing factory and sling products? Jaa ee 78 tonovaine Be straighttorward and honest nal professional and busines relationships: eubesodbom no ates melee eal ‘As the Director have you evaluated the spt ef the CEO's expansion plan to determine it pe ah e | ‘tfectively rales onary inappropriate intvence of goverment officials to obtain aporovle Source: IESBA > wwwethicsboard.org TEA See}A eeous Kampus Objectivity requires an accountant not to compromise professional or business judgment because of bias, conflict of interest or undue influence of others. A chartered accountant shall not undertake a professional activity if a circumstance or relationship unduly influences the accountant’s professional judgment regarding that activity. [You are an Audit Manager: Having worked for several years onthe audit of privately held retail company, you krow company ‘management well ad expect to be offered an ‘opportunity to replace the soon-to-retre Executive Vice resident of Firancial Planning. You are concerned the potion may not be offered to you # there are problems identified during the curert year’s audit. —- — OBJECTIVITY Don't allow bias, conflicts of interest, or the undue influence of others to compromise ‘sound judgement: ‘As the Audit Manager, being mindful of the potential EVP job oppertunity are you able to 1, _ Barend mel to eon a sarin and dm eet (Source: IESBA > wwwethiesboard.orgRee eu Mee al ecu UML kL The principle of professional competence and due care requires an accountant to: Q Attain and maintain professional knowledge and skill at the level required to ensure that a client or employing organization receives competent professional service, based on current technical and professional standards and relevant legislation; and a1 Act diligently and in accordance with applicable technical and professional standards. ‘You are Director of Accounting Policy for an International manufacturing company: The CEO has outlined a new business proposal to set up operations in an emerging market. The plan is supposed to comply with local bribery and corruption laws, but you are not sure everyone would agree with this assessment. Always apply an appropriate level of professional knowledge, skill, and diligence: ‘As the Director, have you done enough work to really understand the rules and regulations gov- CO eto rear sot yur C80 can mete Hoe econ about cance new mane? %, 5 PROFESSIONAL COMPETENCE & DUE CARE Source: IESBA > wwwethicsboard.org eRee eu Mee al ecu UML kL Serving employers with professional competence requires the exercise of sound judgment in applying professional knowledge and skill when undertaking professional activities. Maintaining professional competence requires @ continuing awareness and an understanding of relevant technical, professional and business developments. Continuing professional development enables a chartered accountant to develop and maintain the capabilities to perform competently within the professional environment. Diligence encompasses the responsibility to act in accordance with the requirements of an assignment, carefully, thoroughly and on a timely basis A chartered accountant hall take reasonable step? to ensure that thoze working in a professional capacity under the accountant’s authority have appropriate training and supervision. Where appropriate, a chartered accountant shall make employers or other users of the accountant’s professional services or activities, aware of the limitations inherent in the services or activitiesCe Cee ues Kampus The principle of professional behavior, which requires an accountant to comply with a relevane \uiws and regulations and avoid any conduct thet the accountant khows or| % au Mim Oh should know might discredit the profession 8 trnovatve™ A chartered 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. Conduct that might discredit the profestioh includes conduct that a reasonable and informed third party would be likely to conclude-adversely affects the good reputation of the profession. [PROFESSIONAL BEHAVIOR SSaetataee Comply with all laws and regulations and dor't act in @ way that could discredit ai ene //, \_ te protesion: The marketing department has just proposed a new As the VP of Francs, s the analysis you prepared in suppart ofthe new pring pale fairand || pnecing policy for patent-protected, life-saving drugs sceurte—such that woul old to presen xinyand ot be vewedaa buesor || that could be viewed as taking advantage of Sosperat, Incomplete information that hss” what the mocking Gepariment wants to chao? eau celants Weulern bean suka ersten: Source: IESBA > wwwethiesboard.org ————’ | an analysis that supports the prices the marketing executives want to charge.Cues Kampus The principle of confidentiality requires an accountant to respect the confidentiality oF —— information acquired ae a result Of professional and business relationships. aa ee a <3 # innovative Confidentiality serves the public interest because it facilitates the free flow of| information from the chartered accountant’s client or employing organization to the accountant in the knowledge that the information will not be disclosed to a third party A chartered accountant shall continue to.comply with the principle of confidentiality even after the end of the relationship between the accountant and a client or employing organization. Use experience but do not use or disclose confidential information. CONFIDENTIALITY Yu are Director of Accounting Policy for an Respect the confidentiality of information acquired because of professional and {International manufacturing company: business relationships, subject to applicable laws: ‘The CEO has outlined a new business proposal to Asthe Director you subsequently dscover emails describing a scherme to funnel money to gow |_| set uP operations in an emerging market. The plan is ‘emment oficial: how should you communicate this information intemaly—inciading the CEO ‘supposed to comply with local bribery and corruption I necessary? what cbigation do you have to otly authors er disclose this Information? laws, but you are not Sue everyone would agree with Source: IESBA wwwethiesboard.orgEau els ‘An accountant shail 1 Be alert to the possibility of inadvertent disclosure, including in a social environment, and particularly to a close business associate or an immediate or a close farnily member; Maintain confidentiality of information >» within the firm or employing organization » disclosed by a prospective employing organization; Not discloce confidential information acquired as a result of professional and business relationships outside employing organization (even after the relationship haz ended). Not use confidential information acquired as a result of professional and business relationships for the personal advantage of the accountant or for the advantage of a third party (even after the relationship has ended). Take reasonable steps to ensure that personnel under the accountant’ control, and individuals from whom advice and assistance ‘are obtained, respect the accountant’s duty of confidentiality. The following are circumstances where chartered accountants are or might be required to disclose confidential information or when such disclosure might be appropriate: Q Diselosure iz required by law. law and employing Q Disclosure is permitted by authorized by the client or organisation D Disclosure is not prohibited by law and there is professional duty or right to disclose.BU cho Se ACR LLL UAL ULC UML sce Compliance with the fundamental principles may potentially be threatened by a broad range of circumstances Many threats fall into the categories: 1. Self-interes following Self-review: Advocacy; Familiarity; and Intimidation. The chartered accountant shall: D1 Identify threats to compliance; Evaluate whether such a threat is at an acceptable level; and Dif not, then address the threats by eliminating them or reducing them to an acceptable level ‘Safeguards available to an accountant Unless any threat is clearly insignificant, members must implement safeguards to eliminate the threats or reduce ‘them to an acceptable level co that compliance with the fundamental principles is not compromised The accountant shall do so by: O Eliminating the circumstances, including interests or relationships, that are creating the threats; O Applying safeguards, where available and capable of being applied, to reduce the threats to an acceptable level; or 0 Declining or ending the specific professional activity.Se Uc The threat that a finaneial or other Interest will inappropriately influence a chartered accountants judgment or behavior. a Such financial interests might cause an accountant to be reluctant to take actions that would be against their own interests Examples of circumstances include: @ Incentive compencation arrangements @ Concern over employment security. 1 Commercial pressure from outside the employing organizationPe ULiccd ‘The threat that a chartered accountant will not appropriately evaluate the results of a previous judgment made; or an activity performed by the accountant, or by another individual within the accountant’: firm or employing organization, on which the accountant will rely when forming @ judament as part of performing a current activity. Examples include: 1 An accountant has been involved in maintaining the accounting records of an entity, he may be unwilling to find fault with,the financial statements derived from those records, This would threaten the fundamental principle of objectivity. The business decisions or data being subject to review and justification by the same chartered accountant in business responsible for making those decisions or preparing that data. aRA ee Ad The threat that a chartered accountant will promote a client's or employing organization's position to the point that the accountant's objectivity is compromised. Example: A CFO is being asked to provide and defend misleading and false information to protect interest of employing organisation.iru ke The threat that due to a long or close relationship with a client, or employing organization, a chartered accountant will be too sympathetic to their interests or too accepting of their work. Examples of circumstances that may create familiarity threats include: OA chartered accountant in business in a position to influence financial or non-financial reporting or business decisions having an immediate or close family member who is in a position to benefit from that influence, @ Long azcociation with business contacts influencing business decisions D Acceptance of a gift or preferential treatment, unless the value is clearly insignificant.RAUL Ennead The threat that a chartered accountant will be deterred from acting objectively because of actual or perceived pressures, including attempts to exercise undue influence over the accountant. Examples of circumstances that may create intimidation threats include: O Threat of dismissal or replacement over a disagreement about the application of an accounting principle or the way in which financial information is to be reported. A dominant personality attempting to influence decisions of the chartered accountant.Applicability of the Code General Requirement: Comply with the Code "8 imoyasve Law or regulations preclude from compliance: Thoze law and regulations zhall prevail and the CA shall comply ther parts o Unusual circumstances - following specific requirement of the Code would be disproportionate or might not be in the public interes Consult with professional or regulatory body. A chartered accountant identifies the breach of the Code: Take whatever actions available to address the consequer Determine whether to report the breach to users/prof. of breach ional or regulatory body. Do the right thing!