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Code of Ethics

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Eman Saeed
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17 views24 pages

Code of Ethics

Uploaded by

Eman Saeed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Code of ethics

ADVANCED AUDIT & ASSURANCE


Conceptual Framework
Ethical guidance can take either a
principles-based approach or rules-
based approach.
A conceptual framework relies on a
principles-based approach. Both IFAC
and the ACCA adopt a principles-
based approach.
The Fundamental principles

• Professional Competence & due care


• Professional behavior
• Confidentiality
• Objectivity
• Integrity

The International Ethics Standards Board for Accountants


(IESBA) has developed an International Code of Ethics for
Professional Accountants, which applies to all professional
accountants, whether in public practice or in business. This
serves as the foundation for codes of ethics developed and
enforced by member bodies of IFAC.
Definitions: Fundamental Principles
Integrity: Members should be straightforward and honest in all professional and business relationships.
Objectivity: Members should not allow bias, conflicts of interest or undue influence of others to
compromise professional or business judgments.
Professional competence and due care: Members should attain and 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. Members should act diligently and in
accordance with applicable technical and professional standards when providing professional services.
Confidentiality: Members should respect the confidentiality of information acquired as a result of
professional and business relationships. Information should not be disclosed to third parties without proper
and specific authority, unless there is a legal or professional right or duty to disclose. Such confidential
information should not be used for the personal advantage of members or third parties.
Professional behavior: Members should comply with relevant laws and regulations and should avoid any
conduct that discredits the profession.
[ACCA Code of Ethics and Conduct, Section 110.1 A1]
Breach of Fundamentals Principles
An auditor or accountant may be asked to breach the fundamental principles by an employer,
customer, supplier or lender.
The professional accountant should always apply the conceptual framework, which requires;
- assessment of the significance of the threat
- and the application of an appropriate safeguard.
They must not:
• Allow pressure from others to result in a breach of the fundamental principles.
• Place pressure on others which would result in a breach of the fundamental principles.
Examples of Pressures
Being asked to misrepresent the financial statements
Being asked to lie to the auditor
Being asked to sign-off work as completed that you have not performed
Being asked to inappropriately reduce the extent of the work performed.
Appropriate safeguards include:
• Discussing the matter with the individual exerting the pressure to try and resolve the issue.
• Discussing the matter with a manager, if the manager is not the individual exerting the pressure.
• Seeking advice from within the employer (e.g. Human Resources department).
• Using the organisation's formal dispute resolution process or whistleblowing policies.
• Seeking advice from the ACCA or other independent professional advisor.
• Seeking legal advice.
Fundamental Threats to Apply safeguards
Principles fundamental
Principles;
Objectivity,
independence

Assess the
significance of
risks
Types of Threats
Self Interest Threat
Where the auditor has a financial or other interest that will inappropriately influence their judgment or behaviour.
Self Review Threat
Where non-audit work is provided to an audit client and is then subject to audit,the auditor will be unlikely to admit to errors in their
own work, or may not identify the errors in their own work.
Familiarity Threat
When the auditor becomes too sympathetic or too trusting of a client and loses professional scepticism, or where the relationship
between the auditor and client goes beyond professional boundaries.
Intimidation Threat
Actual or perceived pressures from the client, or attempts to exercise undue influence over the assurance provider, create an
intimidation threat.
Advocacy Threat
Promoting the position of a client or representing them in some way would mean the audit firm is seen to be 'taking sides' with the
client.
Examples of
threats to
objectivity
Assessing the significance of threats
Factors affecting the significance of the threat include:
• Value – e.g. when considering gifts and hospitality.
• Seniority of staff – e.g. when considering rotation of staff.
• Impact to the audit firm – e.g. when considering fee dependency.
• Materiality to the financial statements – e.g. when considering whether a non-audit
service can be provided.
Safeguards
A safeguard is an action or measure that eliminates a threat, or reduces it to an
acceptable level.
The Code of Ethics provides guidance of safeguards for different types of threats to
objectivity and independence.
Self Interest Threats
1. Fee dependency
2. Gifts & Hospitality
3. Owning share & financial Interest
4. Overdue fees
5. Loans & Guarantees
6. Business Relationships
7. Potential Employment with audit Client
8. Contingent fees
9. Compensation & Evaluation Policies of Firm
10. Actual or threatened litigation
Familiarity Threats
1. Long association of senior Personnel
2. Family & Personal Relationships
3. Recruitment Services
4. Employment with an Audit Client
Self Review Threats
1. Accounting & Book keeping services
2. Internal Audit Services
3. Tax Services
4. IT Services
5. Valuation services
6. Temporary Personnel assignments
7. Corporate finance services
8. Legal Services
9. Client staff joins audit firms
10. Serving as a director/officer of audit client

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