CODE OF ETHICS& Ethical Requirements ROSALINDA EVANGELISTAResource Person

Ethical requirementsISQC 1

ISA 220

Meta Duhovnik, Ph.D.Ethical requirements ordinarily comprise Parts A and B of the IFAC Code together with national requirements that are more restrictive.

Meta Duhovnik, Ph.D.

Ethical requirementsThe fundamental principles of professional ethics, which include:

Integrity Objectivity Professional competence and due careConfidentialityProfessional behavior

ISQC 1: Ethical requirementsThe firm shall establish policies and procedures designed to provide it with reasonable assurance that the firm and its personnel comply with relevant ethical requirements. ISA 220: Ethical requirementsThroughout the audit engagement, the engagement partner shall remain alert, through observation and making inquiries as necessary, for evidence of non-compliance with relevant ethical requirements by members of the engagement team.

ISQC 1: Ethical requirements independence

The firm establishes policies and procedures designed to provide it with reasonable assurance that the firm, its personnel and, where applicable, others subject to independence requirements (including network firm personnel) maintain independence where required by relevant ethical requirements. Such policies and procedures shall enable the firm to: communicate its independence requirements to its personnel and, where applicable, others subject to them;identify and evaluate circumstances and relationships that create threats to independence, and to take appropriate action to eliminate those threats or reduce them to an acceptable level by applying safeguards, or, if considered appropriate, to withdraw from the engagement, where withdrawal is permitted by law or regulation.

ISQC 1: Ethical requirements independence

At least annually, the firm obtains written confirmation of compliance with its policies and procedures on independence from all firm personnel required to be independent by relevant ethical requirements.Relevant policies and procedures to assure independence are: setting out criteria for determining the need for safeguards to reduce the familiarity threat to an acceptable level when using the same senior personnel on an assurance engagement over a long period of time; andrequiring, for audits of financial statements of listed entities, the rotation of the engagement partner and the individuals responsible for engagement quality control review, and where applicable, others subject to rotation requirements, after a specified period in compliance with relevant ethical requirements.

ISA 220: Ethical requirements independence

The engagement partner has to:obtain relevant information from the firm and, where applicable, network firms, to identify and evaluate circumstances and relationships that create threats to independence;evaluate information on identified breaches, if any, of the firms independence policies and procedures to determine whether they create a threat to independence for the audit engagement;take appropriate action to eliminate such threats or reduce them to an acceptable level by applying safeguards, or, if considered appropriate, to withdraw from the audit engagement, where withdrawal is possible under applicable law or regulation. The engagement partner shall promptly report to the firm any inability to resolve the matter for appropriate action.

Independence requires:independence of mindThe state of mind that permits the expression of a conclusion without being affected by influences that compromise professional judgment.

independence of appearanceThe 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 auditors independence had been compromised.

IFAC Code

Possible threats to independenceSelf-interest threatSelf-review threatAdvocacy threatFamiliarity threatIntimidation threatIFAC Code

Self-interest threatSelf-interest threat may occur as a result of the financial or other interests of a professional accountant or of an immediate or close family member.IFAC Code

Self-review threat

Self-review threat may occur when a previous judgment needs to be re-evaluated by the professional accountant responsible for that judgment.IFAC Code

Advocacy threat

Advocacy threat may occur when a professional accountant promotes a position or opinion to the point that subsequent objectivity may be compromised.IFAC Code

Familiarity threat

Familiarity threats may occur when, because of a close relationship, a professional accountant becomes too sympathetic to the interests of others.IFAC Code

Intimidation threat

Intimidation threat may occur when a professional accountant may be deterred from acting objectively by threats, actual or perceived.IFAC Code

SafeguardsTwo broad categories:

Safeguards created by the profession, legislation or regulation.Safeguards in the work environment.IFAC Code

Safeguards created by the profession, legislation or regulation includeEducational, training and experience requirements for entry into the profession.Continuing professional development requirements.Corporate governance regulations.Professional standards.Professional or regulatory monitoring and disciplinary procedures.External review by a legally empowered third party of the reports, returns, communications and information produced by a professional accountant. IFAC Code

Safeguards in the work environment includeDepending on the circumstancesFirm wide safeguardsEngagement specific safeguards

IFAC Code

Firm-wide safeguards in the work environment may include: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;Policies and procedures to implement and monitor quality control of engagements;IFAC Code

Firm-wide safeguards (continuation 1)Documented policies regarding: the identification of threats to compliance with the fundamental principles, the evaluation of the significance of these threats and the identification and the application of safeguards to eliminate or reduce the threats to an acceptable level;For firms that perform assurance engagements, documented independence policies regarding: the identification of threats to independence, the evaluation of the significance of these threats and the evaluation and application of safeguards to eliminate or reduce the threats to an acceptable level;

IFAC Code

Firm-wide safeguards (continuation 2)Documented internal policies and procedures requiring compliance with the fundamental principles;Policies and procedures that will enable the identification of interests or relationships between the firm or members of engagement teams and clients;Policies and procedures to monitor and, if necessary, manage the reliance on revenue received from a single client;Using different partners and engagement teams with separate reporting lines for the provision of non-assurance services to an assurance client;

IFAC Code

Firm-wide safeguards (continuation 3)Policies and procedures to prohibit individuals who are not members of an engagement team from inappropriately influencing the outcome of the engagement;Timely communication of a firms policies and procedures, including any changes to them, to all partners and professional staff, and appropriate training and education on such policies and procedures;Designating a member of senior management to be responsible for overseeing the adequate functioning of the firms quality control system;

2009.04.01Meta Duhovnik, Ph.D.IFAC Code

Meta Duhovnik, Ph.D.

Firm-wide safeguards (continuation 4)Advising partners and professional staff of those assurance clients and related entities from which they must be independent;A disciplinary mechanism to promote compliance with policies and procedures;Published policies and procedures to encourage and empower staff to communicate to senior levels within the firm any issue relating to compliance with the fundamental principles that concerns them.

IFAC Code

Engagement-specific safeguards in the work environment may include: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 those charged with governance of the client;IFAC Code

Engagement-specific safeguards (continuation 1) Disclosing to those charged with governance of the client the nature of services provided and extent of fees charged;Involving another firm to perform or re-perform part of the engagement;Rotating senior assurance team personnel.IFAC Code