ACCOUNTANTS & ETHICS

Accountants & Ethics

• Key reasons for expectation of ethical behavior of accountants– Ethical issues may be a matter of law and accountants

are expected to apply them– The profession requires members to conduct

themselves and provide services to the public according to certain standards

– The reputation of the profession and standing is protected

– An accountant’s ethical behavior serves to protect the public interest

APPROACHES TO ACCOUNTANCY ETHICS

• Professionals, collectively share common views and values

• Guidance from a governing body (regulatory or professional body) clarifies the matter regarding the expected professional behavior

• Such guidance is usually known as ‘code of ethics’ or ‘code of conduct’

CODE OF ETHICS - ACCOUNTANTS

• The International Federation of Accountants (IFAC) is an international body representing the world wide major accountancy bodies

• Its mission is to help develop the high standards of professional accountants and enhance the quality of services provided

IFAC & ACCA

• IFAC code of ethics indicates a minimum level of conduct for all accountants

• ACCA, as a member of IFAC, released its own code of conduct, designed to align with IFAC code

• The IFAC code is now administered by the International Ethical Standards Board for Accountants (IESBA)

ACCA CODE OF ETHICS & CONDUCT

• A member of ACCA is bound by the ACCA’s Code of and Ethics and Conduct

• The fundamental principles of ACCA Code are:– Integrity– Objectivity– Professional competence & due care– Confidentiality– Professional behavior

PERSONAL QUALITIES - ACCOUNTANT

• In meeting the fundamental principles, certain qualities are expected of the member

• A student of ACCA is expected to develop some personal and professional qualities to meet the fundamental principles of the Code of Ethics & Conduct

PERSONAL QUALITIES OF ACCOUNTANTS

• Reliability – work should meet professional standards

• Responsibility – take ownership of your work• Timeliness – complete work within agreed time

frame• Courtesy – conduct with courtesy and

consideration towards clients & colleagues• Respect – recognizing the values & rights of others

PROFESSIONAL QUALITIES OF ACCOUNTANTS

• Independence – handle work without prejudice or bias and must be seen to be independent

• Skepticism – question information given to you, and form your own opinion regarding quality and reliability

• Accountability – be accountable for your own judgments and decisions

• Social responsibility – have a public duty…audit work, accountancy work, investment decisions may impact the public

CONFLICTS OF INTEREST

• ACCA members should be aware that a conflict between members’ and clients’ interests might arise – members compete directly with clients, or– have a joint venture with a company that is in

competition with the client• Members and firms should not accept or continue

engagements in which there are, or likely to be, significant conflicts of interest between members, firms and clients

• Members should evaluate the threats arising from a conflict of interest

• They should apply safeguards like:– Disclosure is the most important safeguard– Using a separate team or signing

confidentiality agreements

THREATS TO ACCOUNTATS

• Self interest threat

• Self review threat

• Advocacy threat

• Familiarity threat

• Intimidation threat

SELF INTEREST THREATS

• ACCA code highlights a number of areas in which self-interest threat to independence might arise

Financial interest Close business Employment with Partner on Client Family and personalrelationships Assurance Client Board relationships

Recruitment Gifts and hospitality

Lowballing

High % of Fee % or contingent fee Overdue fees Loans & guarantees

Self Interest Threat

FINANCIAL INTERESTS

• Exists where an audit firm has a financial interest in a client’s affairs, ex.,

– The audit firm owns shares in the client’s firm

– An audit firm is a trustee of a trust that holds shares in the client’s firm

THANK YOU