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03.09.2015
Illustration 3.1
Objectives of Accountantancy
Profession
The IFAC
Code of Ethics for Professional Accountants fundamental
principles for ALL Accountants:
1) Integrity
2) Objectivity
3) Professional Competence and Due Care
4) Confidentiality
5) Professional Behavior
Principles
1) Integrity A professional accountant should
be straightforward and honest in performing
professional services.
2) Objectivity: A professional accountant
should not allow bias, conflict of interest or
undue influence of others to override
professional or business judgments.
Principles
Principles
4) Confidentiality: A professional accountant
Compliance
with
the
fundamental principles may
potentially be threatened by a
broad range of circumstances.
Many threats fall into the
following categories:
Self-interest threats
Self-review threats
Advocacy threats
Familiarity threats
Intimidation threats
Figure 3.5
Self-Interest Threat
A Self-interest threat occurs as a result of the
financial or other interests of a professional
accountant or of an immediate or close family
member;
Self-Review Threat
Self-Review Threat occurs occur when a
previous judgment needs to be reevaluated by the professional accountant
responsible for that judgment.
Advocacy Threat
An Advocacy Threat occurs when a
Familiarity Threat
Familiarity Threat occurs when, by virtue
of a close relationship with an assurance
client, its directors, officers or employees,
an auditor becomes too sympathetic to the
clients interests.
Intimidation Threat
Intimidation Threat occur
when a professional
accountant may be deterred from acting
objectively by threats, actual or perceived
Examples of circumstances:
Being threatened with dismissal or replacement in
relation to a client engagement.
Being threatened with litigation.
Being pressured to reduce inappropriately the extent
of work performed in order to reduce fees.
Safeguards
Safeguards that may eliminate or reduce such
threats to an acceptable level fall into two
broad categories:
(1) Safeguards created by the profession,
legislation or regulation;
(2) Safeguards in the work environment.
PART B Contents
Professional Appointment
Client Acceptance - consider whether
acceptance would create any threats to
compliance with the fundamental principles
Engagement Acceptance - agree to provide
only those services that the accountant is
competent to perform.
Conflicts of Interest
An accountant
should take
reasonable steps to
identify
circumstances that
could pose a conflict
of interest.
Second Opinions
Providing a second opinion on the application
of accounting, auditing, reporting or other
standards or principles by or on behalf of a
company that is not an existing client may
cause threats to compliance with the
fundamental principles
Safeguards such as seeking client permission
to contact the existing accountant, describing
the limitations surrounding any opinion and
providing the existing accountant with a copy
of the opinion may be required.
IndependenceAssurance Engagements
In the case of an assurance engagement it is in
the public interest and, therefore, required by
the Code of Ethics, that members of assurance
teams, firms and, when applicable, network
firms be independent of assurance clients
Independence
Independence involves independence in appearance
and independence in mind.
Independence in Appearance : 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
firms, or a member of the assurance teams, integrity,
objectivity or professional skepticism had been
compromised.
Independence of Mind 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.
Examples Part B
Examples in Part C