CODE OF

ETHICS FOR
PROFESSIONAL
ACCOUNTANTS
IN THE
PHILIPPINES
C H R I S T I A N K I N G S . I L A R D E , C PA
 PART A PART B PART C
General Application Professional Professional
Accountants in Public Accountants in
Practice Business
 Integrity Objectivity Professional
Competence and
Due Care
F U N D A M E N TA L
PRINCIPLES

Confidentiality Professional
Behavior
 A professional accountant should be
straightforward and honest in professional
and business relationships. Integrity
INTEGRITY implies not merely honesty but it requires
being brave enough to fight for what you
believe in.
 OBJECTIVITY
The principal of objectivity imposes the
obligation on all professional
accountants to be fair, intellectually
honest and free of conflicts of interest.
PRO FE SSION A A professional accountant should not
L undertake any engagement or accept
C OMPE T EN CE an employment which he or she cannot
AND reasonably expect to discharge with
DU E CA RE professional competence.
 PHASES OF
PROFESSIONAL
COMPETENCE
Attainment of Maintenance of
Professional Competence Professional Competence
 Due care encompasses the responsibility
to perform professional services in
DUE CARE accordance with technical and
professional standards, carefully,
thoroughly and on a timely basis.
 CONFIDENTIALITY
A professional accountant should
respect the confidentiality of
information acquired during the course
of performing professional services and
should not use or disclose any such
information without proper and specific
authority or unless there is a legal or
professional right or duty to disclose.
 Permitted by the client or employer

C I R C U M S TA N C E S
WHERE
CONFIDENTIAL
I N F O R M AT I O N Required by law
M AY B E
DISCLOSED

There is professional duty or right

to disclose confidential information
 PRO FESSIONAL
B E HAV IOR
A professional accountant should
comply with relevant laws and
regulations and refrain from any
conduct which might bring discredit to
the profession
 3 step approach
• Identify threats to compliance
with fundamental principles
CONCEPTUAL
FRAMEWORK
• Evaluate the significance of
APPROACH threats identified
• Apply safeguards, when
necessary, to eliminate the
threats or reduce them to an
acceptable level
 1. Self Interest
T H R E AT S T O
2. Self review
COMPLIANCE
WITH 3. Advocacy
F U N D A M E N TA L
PRINCIPLES 4. Familiarity
5. Intimidation
 SELF It is a threat that a financial or other
interest will inappropriately influence the
INTEREST professional accountants judgement or
THREAT behavior
A direct financial interest or material indirect
financial interest in a client
A loan or guarantee to or from a client or any of its
directors or officers
Undue dependence on total fees from a particular
client
Concern about the possibility of losing the
engagement
Having a close business relationship with the client

Potential employment with a client

Contingent fees relating to an engagement

 The threat that the professional accountant
SELF will not objectively evaluate the results of
REVIEW the previous judgement made or service
THREATS performed in forming a conclusion about
the subject matter of the engagement.
 A member of the engagement team being, or having
recently been, a director or officer of the client.

A member of the engagement team being, or having

recently been employed of the client in a position to extent
direct and significant influence over the subject matter of
C I R C U M S TA N C E S the engagement
T H AT C R E AT E
SELF REVIEW
T H R E AT
Performing services for a client that directly affect the
subject matter of the engagement

Preparation of original data used to generate financial

statements or preparation of other records that are the
subject matter of another engagement
e. Reporting on the operation
of financial systems after
being involved in their design
or implementation
f. The discovery of
significant error during re-
evaluation of the work of the
professional accountant in
public practice.
 The threat that the professional
accountant will promote a client’s
or employer’s position to the point
that the professional accountant’s
objectivity is compromised.
ADVOCAC
Y THREAT Acting as an
Dealing in, or
advocate on
being a promoter
behalf of client in
of, share or other
litigation or in
securities in a
resolving disputes
client
with third parties.
 The threat that a professional accountant
FA M I L I A R I T will promote a client’s or employer’s
Y T H R E AT position to the point that the professional
accountant’s objectivity is compromised.
 C I R C U M S TA N C E S T H AT
C R E AT E FA M I L I A R I T Y T H R E AT

a. A member of the engagement team

having an immediate family member or
close family member who is a director
or officer of the client
b. A member of the engagement team
having an immediate family member or
close family member who, as an
employee of the assurance client, is in a
position to exert direct and significant
influence over the subject matter of the
engagement
c. A former partner of the firm being a
director, officer of the client or an
employee in a position to exert direct and
significant influence over the subject
matter of the engagement
d. Long association of a senior member of
the engagement team with the client
e. Acceptance of gifts or preferential
treatment, unless the value is clearly
insignificant, from a client, its directors or
employees
IN TIMIDATION T HR EAT
The threat that the professional accountant will be
deterred form acting objectively because of actual
or perceived pressures, including attempts to
exercise undue influence over the professional
accountant
a. Being threatened with litigation
b. Being threatened with dismissal or
replacement over a disagreement with the
application of an accounting principle
c. Being pressured to reduce inappropriately the
extent of work performed in order to reduce
fees.
SAFEGUARDS
These are actions or other
measures that may eliminate
threats with the fundamental
principles. The nature of the
safeguards to be applied will
vary depending upon the
circumstances.
 Safeguards created by
SAFEGUARD the profession, Safeguards in the
C AT E G O R I E S legislation or work environment
regulation, and;
 Educational, training and experience
requirements for entry into the profession

Continuing education requirements

SAFEGUARDS
C R E AT E D B Y
PROFESSION,
Corporate governance regulations
L E G I S L AT I O N
OR
R E G U L AT I O N Professional standards and monitoring and
disciplinary processes

External review of a firm’s quality control

system
 Firm-wide
safeguards
SAFEGUARDS
IN THE WORK
ENVIRONMENT Engagement
specific
safeguards
 Leadership of the firm that stresses the importance of
compliance with the fundamental principles

Leadership of the firm that establishes the expectation that

members of an assurance team will act in the public interest
FIRM WIDE
SAFEGUARDS
Policies and procedures to implement and monitor quality
control engagements

Documented policies regarding the identification of threats to

compliance with the fundamental principles, the evaluation of
the significance of these threats and identification and the
application of safeguards to eliminate or reduce threats.
 e. Documented independence policies regarding the identification of
threats to independence.

f. Documented internal policies and procedures requiring compliance

with the fundamental principles

g. Policies and procedures that will enable interest or relationships

between the firm or members of engagement teams and clients
FIRM WIDE
SAFEGUARDS h. Policies and procedures to monitor and, if necessary, manage the
reliance on revenue received from a single client.

i. Using different partners and engagement teams with separate

reporting lines for the provision of non-assurance services to an
assurance client

j. Policies and procedures to prohibit individuals who are not members

of an engagement team from inappropriately influencing the outcome
of the engagement
 k. Timely communication of a firm’s policies and procedures, including
any changes to them, to all partners and professional staff, and
appropriate training and education on such policies and procedures

l. Designing a member of senior management to be responsible for

overseeing the adequate functioning of the firm’s quality control system

FIRM WIDE m. Advising partners and professional staff of those assurance clients
SAFEGUARDS and related entities from which they must be independent

n. A disciplinary mechanism to promote compliance with policies and

procedures

o. Published policies and procedures to encourage and empower staff to

communicate to senior levels within the fundamental principles that
concerns them.
 Involving an additional professional accountant to review the work
done or otherwise advise as necessary

Consulting an independent third party, such as a committee of

independent directors, a professional regulatory body or another
professional accountant

Discussing ethical issues with TCWG of client

ENGAGEMENT
SPECIFIC
SAFEGUARDS Disclosing to those TCWG of the client the nature of service provided
and extent of these charged.

Involving another firm to perform or re perform part of the

engagement

Rotating senior assurance team pesonnel

SAFEGUARDS WITHIN CLIENTS'
SYSTEMS AND PROCEDURES
When client appoints a firm in public practice to perform an engagement, persons
other than management ratify or approve the appointment

The client has competent employees with experience and seniority to make
managerial decisions

The client has implemented internal procedures that ensure objective choices in
commissioning non-assurance engagements

The client has a corporate governance structure that provides appropriate oversight
and communications regarding the firm’s services
 PART B
PROFESSIONAL
ACCOUNTANTS IN
PUBLIC PRACTICE
 1. CLIENT ACCEPTANCE
Before accepting a new client relationship, a
professional accountant in public practice should
consider whether acceptance would create any
threats to compliance with fundamental principles.
PROFESSIONAL Appropriate safeguards may include obtaining
APPOINTMENT knowledge and understanding of the client, its
owners, managers and those responsible for its
governance and business activities or securing the
clients commitment to improve corporate
governance practices or internal controls
 2. ENGAGEMENT ACCEPTANCE
A professional accountant in public practice should agree to provide only
those services that he is competent to perform.
Appropriate safeguards include:
1. Acquiring an appropriate understanding of the nature of the client’s
business
Acquiring knowledge of relevant industries or subject matters
PROFESSIONAL 2.

APPOINTMENT 3. Possessing or obtaining experience with relevant regulatory or

reporting requirements
4. Assigning sufficient staff with the necessary competencies
5. Using experts where necessary
6. Agreeing on realistic time frame for performance of the engagement
7. Complying with quality control policies and procedures designed to
provide reasonable assurance that specific engagements are accepted
only when they can be performed competently
 A professional accountant in public practice who is
asked to replace another professional accountant in
public practice, or who is considering tendering for
CHANGES IN an engagement currently held by another
PROFESSIONAL professional accountant in public practice, should
APPOINTMENT determine whether there are any reasons,
professional or other for not accepting the
engagement, such as circumstances that threaten
compliance with fundamental principles.
C ONFL ICT S A professional accountant in public practice should
OF take reasonable steps to identify circumstances that
INTE R EST could pose a conflict of interest.
 A professional accountant in public practice who is
asked to provide a second opinion on the application
SECOND of accounting, auditing, reporting or other standards
or principles to specific circumstances or
OPINIONS transactions by or on behalf of a company or an
entity that is not an existing client may give rise to
threats to compliance with fundamental principles.
 PROFESSIONAL FEES SKILL AND KNOWLEDGE LEVEL OF TRAINING AND
REQUIRED FOR THE TYPE EXPERIENCE OF THE
OF PROFESSIONAL PERSONS NECESSARILY
FEES AND SERVICE INVOLVED ENGAGED IN PERFORMING
THE PROFESSIONAL
OTHER TYPES SERVICE

OF
R E M U N E R AT I O N

TIME NECESSARILY DEGREE OF

OCCUPIED BY EACH RESPONSIBILITY THAT
PERSON ENGAGED IN PERFORMING THOSE
PERFORMING THE SERVICES ENTAILS
PROFESSIONAL SERVICES
 2. Contingent Fees

Contingent fees may give rise to a

FEES AND
OTHER TYPES self-interest threat to objectivity;
OF
R E M U N E R AT I O N • Nature of the engagement
• Range of possible fee amounts
• Basis for determining the fee
• Whether the outcome or result of the
transaction is to be reviewed by an
independent third party.
 An advance written agreement with the client
as to basis of remuneration

Disclosure to intended users of the work

performed by the professional accountant in
public practice and the basis for remuneration
A P P R O P R I AT E
SAFEGUARDS
Quality Control policies and procedures

Review by an objective third party of the work

performed by the professional accountant in
public practice
 Accepting such a referral fee or
commission may give rise to self interest
threats to objectivity and professional
competence and due care. A professional
REFERRAL accountant in public practice should not
FEE OR pay or receive a referral fee or
COMMISSION commission unless the professional
accountant in public practice has
established safeguards to eliminate the
threats or reduce them to an acceptable
level.
 Disclosing to the client any
arrangements to pay a referral
fee
A P P R O P R I AT E
SAFEGUARDS
Disclosing to the client any
arrangements to receive any
referral fees

Obtaining advance agreement

from the client for
commission arrangement
 When a professional accountant in public practice
solicits new work through advertising or other
forms of marketing, a self interest threat to
professional behavior is created if services,
achievements or products are marketed in a way
that is inconsistent with that principle.
MARKETING
PROFESSIONAL
S E RV I C E S

Any form of marketing is allowed

PRO FE SSION A
L
AC COU NTA NT
SH OUL D NOT: Make exaggerated claims for
services offers, qualifications
Make disparaging references to
unsubstantiated comparisons to the
possessed or experience gained; or work of another
 Appropriate safeguards should be
considered and applied as necessary to
eliminate them or reduce them to an
acceptable level. When threats can not be
GIFTS AND
H O S P I TA L I T Y eliminated or reduced to an acceptable
level through the application of
safeguards, a professional accountant in
public practice should not accept such an
offer
 A professional accountant in public
practice should not assume custody of
CUSTODY client monies or other assets unless
permitted to do so by law and if so, in
OF CLIENT compliance with any additional legal
ASSETS duties imposed on a professional
accountant in public practice holding such
assets.
 a. Keep such assets separately from
personal or firm assets
b. Use such assets only for the purpose
for which they are intended
c. At all times, be ready to account for
A P P R O P R I AT E those assets, and any income,
SAFEGUARDS dividends or gains generated, to any
; persons entitled to such accounting
d. Make appropriate inquiries of the
source of such assets comply with all
relevant laws and regulations relevant
to the holding of and accounting for
such assets.
 A professional accountant in public
OBJECTIVITY
practice who provides an assurance
-ALL
S E RV I C E S service is required to be independent of
the assurance client.
 Withdrawing from the engagement team
Supervisory procedures
Terminating the financial or business
A P P R O P R I AT E relationship giving rise to the threat
SAFEGUARDS
Discussing the issue with higher levels of
management within the firm
Discussing the issue with those charged
with governance of the client
 Taking an unbiased viewpoint in the
INDEPENDENCE performance of the examination and the
preparation of the report
 TYPES OF
INDEPENDENCE
Independence in Independence in
Mind Appearance
 The members of the assurance team Perform assurance services (start) to
and the firm should be independent of assurance report (end)
the assurance client during the period
of the assurance engagement.

ENGAGEMENT
PERIOD

FS Audit Includes the period covered by the

financial statements reported on by
the firm
 The members of
the assurance
team, the firm
FS AUDIT
and network firms
ENGAGEMENT
are required to be
independent of
the audit client
INDEPENDENCE
REQUIREMENT Where the
distribution of the
report is not
NON-AUDIT
restricted, firm
ASSURANCE
must be
ENGAGEMENT
independent of
the assurance
client
 INDEPENDENCE
REQUIREMENT
NON-AUDIT ASSURANCE
ENGAGEMENT
Where the distribution of the report is
restricted to specified users, the members
of the assurance team must be independent
of the assurance client.
The firm should not have any material
financial interest in an assurance client.
 S UMMARY OF INDEPENDE NCE
RE QUIRE MENT

MEMBERS OF FIRM NETWORK FIRM

ASSURANCE TEAM

Audit Yes Yes yes

Non-Audit (not restricted) Yes Yes No

Non-Audit( restricted) Yes No No

 INDEPENDENCE
I N T E R P R E TAT I O N A N D R U L I N G

 Financial Interest