7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
1/47
Code of Ethics forProfessional Accountants
Nasir U Ahmed, FCAMember Council, ICAB
21 December 2008
A PresentationA Presentation
BB
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
2/47
WHAT ARE ETHICS ?
A sense of agreement in a society as to what is right
and wrong.
Ethics reresent a set of moral rinciles! rules ofconduct or "alues.
Ethics aly when an indi"idual has to ma#e adecision from "arious alternati"es regarding moralrinciles.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
3/47
$%&ecti"es of Professional
Accountants
wor# to the highest standards of
rofessionalism
attain the highest le"els of erformance! and
meet the u%lic's interest
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
4/47
e o e o cs ! ! anC*
Part A esta%lishes the fundamental rinciles ofethics for rofessional accountants and ro"ides a
concetual framewor# for alying those rinciles.
Parts ) and C illustrate how the concetualframewor# is to %e alied in seci+c situations.
, Part ) alies to !ro"essional accountants in!ublic !ractice#, Part C alies to !ro"essional accountants in
business#
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
5/47
I-AC Code o" $thics %fundamentalrinciles for all Accountants
Inte&rit '(ec 110)
*b+ectiit '(ec 120)
Pro"essional Com!etence and Due Care '(ec1-0)
Con.dentialit '(ec 1/0)
Pro"essional Behaior '(ec 10)
Continuation
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
6/47
Inte&rit The rincile of integrity imoses ano%ligation on all rofessional accountants to %estraightforward and honest in erformingrofessional ser"ices. It also imlies fair dealingand truthfulness.
*b+ectiit The rincile of o%&ecti"ity imoses
on all rofessional accountant not to comromisetheir rofessional or %usiness &udgment %ecauseof %ias! con/ict of interest or undue in/uence ofothers.
Continuation
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
7/47
Pro"essional Com!etence and Due Care Arofessional accountant has a continuing duty to
maintain rofessional #nowledge and s#ill at thele"el re0uired to ensure that a client or emloyerrecei"es cometent rofessional ser"ice %ased oncurrent de"eloments in ractice! legislation andtechni0ues.
Continuation
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
8/47
Con.dentialit A rofessional accountant shouldresect the con+dentiality of information ac0uired as
a result of rofessional and %usiness relationshisand should not disclose any such information tothird arties without roer and seci+c authority.
Pro"essional Behaior A rofessional accountant
should comly with rele"ant laws and regulationsand should a"oid any action that discredits therofession.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
9/47
Conce!tual Frame3or4A!!roach
A concetual framewor# re0uires a rofessionalaccountant to identify! e"aluate and addressthreats to comliance with the fundamental
rinciles! rather than merely comly with a setof seci+c rules which may %e ar%itrary.
If threats to ethics are not clearly insigni+cant! a
rofessional accountant should alysafeguards to eliminate the threats or reducethem to an acceta%le le"el.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
10/47
5hreats and (a"e&uards
Comliance with the fundamental rinciles
may otentially %e threatened %y a %road
range of circumstances. 1any threats fall intothe following categories
Self2interest threats Self2re"iew threats Ad"ocacy threats -amiliarity threats Intimidation threats
Continuation
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
11/47
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
12/47
Self2Interest ThreatA Self-interest threatoccurs as a result of the+nancial or other interests of a rofessional
accountant or of an immediate or close"amilmem%er3
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
13/47
Self Interest ThreatsCircumstances
A .nancial interest in a client or &ointly holding a+nancial interest with a client.
4ndue deendence on total fees from a client. Ha"ing a close %usiness relationshi with a client.
Concern a%out the ossi%ility of losing a client.
Potential emloyment with a client.
Contin&ent "ees relating to an engagement.
A loan to or from a client or any of its directors oro5cers.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
14/47
Self2Re"iew Threat
Self-Review Threat occurs occur when are"ious &udgment needs to %e re2e"aluated
%y the rofessional accountant resonsi%le forthat &udgment.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
15/47
Self2Re"iew ThreatsCircumstances
The disco"ery of a signi+cant error during a re2e"aluation ofthe wor# of the auditor.
Reorting on the oeration of +nancial systems after %eingin"ol"ed in their design or imlementation.
Ha"ing reared the original data used to generate recordsthat are the su%&ect matter of the engagement.
A mem%er of the team %eing! or ha"ing recently %een! adirector or o5cer of that client.
A mem%er of the team %eing! or ha"ing recently %een!emloyed %y the client in a osition to e6ert direct andsigni+cant in/uence o"er the su%&ect matter of theengagement.
Performing a ser"ice for a client that directly a7ects thesu%&ect matter of the engagement.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
16/47
Ad"ocacy Threat
An Advocacy Threat occurs when arofessional accountant romotes a osition oroinion to the oint that su%se0uent
o%&ecti"ity may %e comromised.
E6amles of circumstances that createad"ocacy threats
Selling! underwriting or otherwise dealing in
+nancial securities or shares of a client3 Acting as an ad"ocate on %ehalf of a client in
litigation or disutes with third arties.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
17/47
-amiliarity Threat
Familiarity Threatoccurs when! %y "irtue of
a close relationshi with a client! its directors!o5cers or emloyees! an auditor %ecomes too
symathetic to the client's interests.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
18/47
-amiliarity ThreatsCircumstances
Immediate family mem%er or close family mem%er whois a director! o5cer! or in/uential emloyee of the client3
A mem%er of the team ha"ing a close family mem%er
who! as an emloyee of the client! is in a osition toe6ert direct and signi+cant in/uence o"er the su%&ectmatter of the engagement3
A former artner of the +rm %eing a director! o5cer ofthe client or an emloyee in a osition of signi+cantin/uence3
8ong association of a senior mem%er of the team withthe client
Accetance of gifts or hositality! unless the "alue isclearly insigni+cant! from the client! its directors! o5cersor emloyees.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
19/47
Intimidation Threat
Intimidation Threat occur when a rofessionalaccountant may %e deterred from acting o%&ecti"ely
%y threats! either actual or ercei"ed.
E6amles of circumstances
)eing threatened with dismissal or relacement
in relation to a client engagement.)eing threatened with litigation.
)eing ressured to reduce inaroriately thee6tent of wor# erformed in order to reduce fees.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
20/47
Safeguards
Safeguards that may eliminate or reduce suchthreats to an acceta%le le"el fall into three%road categories
Safeguards created %y the rofession!legislation or regulation3
Safeguards within the client3 and Safeguards within the +rm's own systems and
rocedures.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
21/47
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
22/47
Safeguards within the Client
When the client's management aoints the +rm!ersons other than management ratify or aro"e the
aointment3 The client has cometent emloyees to ma#e
managerial decisions3
Policies and rocedures that emhasi9e the client's
commitment to fair +nancial reorting3 A cororate go"ernance structure! such as an audit
committee! that ro"ides aroriate o"ersight andcommunications regarding a +rm's ser"ices.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
23/47
Safeguards in the wor# en"ironment
leadershi that stresses the imortance of indeendenceand the e6ectation that mem%ers of the teams will act inthe u%lic interest.
Policies and rocedures to imlement and monitor 0ualitycontrol of the engagements3
:ocumented indeendence olicies regarding theidenti+cation of threats to indeendence! the e"aluation ofthe signi+cance of these threats and the identi+cation and
alication of safeguards to eliminate or reduce the threats!other than those that are clearly insigni+cant! to anacceta%le le"el3
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
24/47
Resolution of EthicalCon/icts
If the matter remains unresol"ed! the rofessionalaccountant should consult with other aroriateersons within the +rm
Where a matter in"ol"es a con/ict with! or within!an organi9ation! consult with those charged withgo"ernance of the organi9ation! such as the %oardof directors or the audit committee.
If a signi+cant con/ict cannot %e resol"ed! o%tainrofessional ad"ice from the rele"ant rofessional
%ody or legal ad"isors. If! after e6hausting all rele"ant ossi%ilities! the
ethical con/ict remains unresol"ed! a rofessionalaccountant should! where ossi%le! refuse to remainassociated with the matter creating the con/ict.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
25/47
Professional Aointment
Client Accetance2 consider whetheraccetance would create any threats tocomliance with the fundamental rinciles
Engagement Accetance% agree to ro"ideonly those ser"ices that the accountant iscometent to erform.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
26/47
Chan&es in a Pro"essionalA!!ointment
)efore acceting an aointment in"ol"ingser"ices that were carried out %y another! theroosed auditor should
Re0uest ermission from the client to contactformer auditor directly3
Contact e6isting auditor %efore %eginning
audit.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
27/47
Information from E6istingAuditor
$nce the client ermission is o%tained! thee6isting auditor should ro"ide informationhonestly and unam%iguously.
If the roosed auditor is una%le to communicatewith the e6isting auditor! the roosed auditorshould try to o%tain information a%out anyossi%le threats %y other means such as throughin0uiries of third arties or %ac#groundin"estigations on senior management.
The e6isting auditor is no longer re0uired toro"ide information in writing or regardingreasons not to ta#e an audit.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
28/47
Con6icts o" Interest
A rofessional accountant in ractice should ta#ereasona%le stes to identify circumstances that
could ose a con/ict of interest. Suchcircumstances may gi"e rise to threats tocomliance with the fundamental rinciles
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
29/47
Second $inions
Pro"iding a second oinion on the alication ofaccounting! auditing! reorting or other standardsor rinciles %y or on %ehalf of a comany that is
not an e6isting client may cause threats tocomliance with the fundamental rinciles.
Safeguards such as see#ing client ermission tocontact the e6isting auditor! descri%ing thelimitations surrounding any oinion and ro"iding
the e6isting auditor with a coy of the oinion may%e re0uired.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
30/47
Fees and *ther 5!es o"7emuneration
An auditor may 0uote whate"er fee deemed to%e aroriate. Howe"er! a self2interest threatto rofessional cometence and due care is
created if the fee 0uoted is so low that it may%e di5cult to erform the engagement.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
31/47
Commissions! Referral -ees! andContingent -ees
A rofessional accountant in u%lic racticeshould not ay or recei"e a referral fee or
commission! unless he;she has esta%lishedsafeguards to eliminate the threats or reducethem to an acceta%le le"el.
Contingent fees are widely used for certain
tyes of non2assurance engagements. Theymay! howe"er! gi"e rise to self2interest threatsto comliance with the fundamental rinciles.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
32/47
Ad"ertising and 1ar#eting
When a rofessional accountant in u%licractice solicits new wor# through ad"ertising orother forms of mar#eting! there may %e otential
threats to comliance with the fundamentalrinciles.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
33/47
What Ad"ertising Cannot :o
A rofessional accountant should not %ring therofession into disreute when mar#etingrofessional ser"ices. He;she should %e honest
and truthful and should not 1a#e e6aggerated claims for ser"ices o7ered!
0uali+cations ossessed or e6erience gained3 or
1a#e disaraging references to unsu%stantiated
comarisons to the wor# of another.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
34/47
i"ts and 9os!italit
Self2interest threats to o%&ecti"ity may %e createdif a gift from a client is acceted3 intimidationthreats to o%&ecti"ity may result from the
ossi%ility of such o7ers %eing made u%lic.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
35/47
Custody of Client Assets
Safeguard against a self2interest threat to o%&ecti"ity !a rofessional accountant in u%lic ractice entrustedwith money (or other assets* %elonging to others
should =ee such assets searately from ersonal or +rm
assets3 and 4se such assets only for the urose for which they
are intended. At all times! %e ready to account for those assets!
and any income! di"idends or gains generated. Comly with all rele"ant laws and regulations
rele"ant to the holding of and accounting for suchassets.
A li ti " F 4 t
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
36/47
A!!lication o" Frame3or4 to(!eci.c (ituations
The Code of Ethics! discusses a rinciles2%asedframewor# for identifying! e"aluating andresonding to threats. The framewor#
esta%lishes rinciles to identify threatsto ethicsrinciles! e"aluate the signi+cance of thosethreats! and! if the threats are other than clearlyinsigni+cant! identify and aly safeguards toeliminate the threats or reduce them to anacceta%le le"el.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
37/47
An accountant may erform ser"ices in a countryother than his home country. If di7erences e6ist%etween ethical re0uirements of the two
countries! the strictest ro"isions should %ealied.
Cross%Border Actiities
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
38/47
The I-AC Code rohi%its the followingnon2audit ser"ices for audit clients
Boo44ee!in& (erices :aluation serices
Mana&ement decision ma4in& "unctions Bro4er%dealer or inestment adisor serices ;iti&ation su!!ort
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
39/47
-inancial in"ol"ement with aclient
direct +nancial interest in a client3
indirect material +nancial interest
loans to or from the client or anydirector or ma&or stoc#holder inthe client comany3
+nancial interest in a &oint"enture with a client or
emloyee(s* of a client. +nancial interest in non2client
with in"estor or in"esteerelationshi with the client.
R i%iliti R di th 4 f
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
40/47
Resonsi%ilities Regarding the 4se of>on2Accountants
If a rofessional accountant does not ha"e thecometence to erform a seci+c art of therofessional ser"ice! technical ad"ice may %esought from e6erts such as other rofessionalaccountants! lawyers! actuaries! engineers!geologists! and e"aluators. Howe"er! since theauditors ha"e ultimate resonsi%ility for the
ser"ice! it is his resonsi%ility to see that there0uirements of ethical %eha"ior are followed.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
41/47
Acti"ities Incomati%le with thePractice of Pu%lic Accountancy
A rofessional accountant in u%lic racticeshould not concurrently engage in any %usiness!occuation or acti"ity that imairs or might
imair integrity! o%&ecti"ity or indeendence! orthe good reutation of the rofession. The simultaneous engagement in another acti"ity
unrelated to assurance or accounting ser"ices!which reduces the accountant's a%ility to conduct
his accounting ractice according to ethicalrinciles! is inconsistent with u%lic ractice.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
42/47
PROFESSIONAL
ACCOUNTANTS-IN SERVICE
Con/ict of 8oyalties
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
43/47
Con/ict of 8oyalties
Emloyed rofessional accountants owe a duty ofloyalty to their emloyer as well as to theirrofession and there may %e times when the two
are in con/ict. An emloyee cannot legitimately %e re0uired to
%rea# the law! %reach the ethics! rules! andstandards of the accounting rofession! lie to theiremloyer's auditors! or %e associated with a
statement that materially misreresents the facts. If emloyed accountants cannot resol"e any
material issue in"ol"ing a con/ict %etween theiremloyers and their rofessional re0uirementsthey may ha"e no other recourse %ut to resign.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
44/47
Suort for Professional Colleaguesand Professional Cometence
Suort for Professional ColleaguesA rofessionalaccountant! articularly one ha"ing authority o"erothers! should allow them to de"elo their own
&udgment in accounting matters. Professional CometenceAn accountant emloyed
in industry! commerce! the u%lic sector oreducation may %e as#ed to underta#e signi+canttas#s for which she has not had su5cient seci+c
training or e6erience. Where aroriate e6ertad"ice and assistance should %e sought.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
45/47
Presentation of Information
A rofessional accountant is e6ected toresent +nancial information fully! honestlyand rofessionally and so that it will %e
understood in its conte6t.
y
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
46/47
ysanctions
:iscilinary action ordinarily arises from suchissues as failure to o%ser"e the re0uired standard of rofessional
care! s#ills or cometence3 non2comliance with rules of ethics and discredita%le3
or dishonora%le conduct.
Sanctions commonly imosed %y discilinary%odies include rerimand! +ne! ayment of costs! withdrawal of
racticing rights! susension! and e6ulsion frommem%ershi.
7/23/2019 CPE Seminar Paper_Nasir U Ahmed_Code of Ethics for Professional Accountants_21Dec08
47/47
Top Related