PROFESSIONAL AND ETHICAL CONSIDERATION

PART 1 : BY-LAWS ON PROFESSIONAL ETHICS

PART C : PROFESSIONAL ACCOUNTANTS IN BUSINESS

SECTION 300 - INTRODUCTION

Describes the conceptual framework contained in Part A – to be applied by professional accountants (PA) in business.This part not describes all of the circumstances and relationships that could be encountered by PA in business that create or may create threats to comply with the fundamental principles.

PA is encouraged to be alert for such circumstances and relationships.

SECTION 300 - INTRODUCTION

WHO?

Investors

CreditorsEmployers

Governments

Public

SECTION 300 - INTRODUCTION

Salaried employee

Partner

Director

Owner manager

Volunteer

OthersPROFESSIONAL

ACCOUNTANTS IN BUSINESS

SECTION 300 - INTRODUCTION

Self-interest

Self-review

Advocacy

Familiarity

Intimadation

SECTION 300 - INTRODUCTION I

ncentive compensation arrangement

Concer

n

over

empl

oyment

securit

y

SELF-INTEREST THREATS

SECTION 300 - INTRODUCTION

THREATS

ADVOCACY THREATPA may promote the organization’s position in some way03

SELF-REVIEW THREATDetermining the appropriate accounting treatment for a business combination

02

SECTION 300 - INTRODUCTIONA

ccepting a gift or preferential treatment

SECTION 300 - INTRODUCTION

Threat of dismissal or replacement of the PA in business/close/immediate family member over a disagreement

Dominant personality attempting to influence the decision making process

SECTION 300 - INTRODUCTION

Safeguards

created by the

profession,

legislation or

regulation

Safeguards in the

work environm

ent

SAFEGUARDS

Ethics

Recruitment procedure

Strong Internal Control

Policies & Procedures

Consultation

DisciplinarySE

CTIO

N 30

0 -

INTR

ODUC

TION

SECTION 310 – CONFLICTS OF

INTEREST1

• Serve a management for two employing organizations and acquire confidential information from one employing organization and PA used the information for advantage or disadvantage of the other employing organization.

2• PA undertaking a professional activity

of two parties in a partnership and assist them dissolve their partnership

3• Prepared financial information for

certain member of management who are seeking to undertake a management buyout

4

• Being responsible for selecting a vendor for the accountant’s employing organization when an immediate family member of the PA could benefit financially from the transaction.

EXAMPLE OF CONFLICTS OF INTEREST

SECTION 310 – CONFLICTS OF

INTERESTTo eliminate or reduce any of threat a PA shall exercise professional judgement and be alert to all interests and relationships that a reasonable and informed 3rd party

PA shall remain alert to the fundamental principle of confidentiality when making disclosures or sharing information within the employing organization and seeking guidance of 3rd parties.

PA should apply safeguards to eliminate the threat to an acceptable level if not the PA should decline to undertake or discontinue the professional activity that would result in conflict of interest.

SECTION 310 – CONFLICTS OF

INTEREST-Restructuring or

segregating-Obtaining

appropriate oversight

-Withdraw from the decision-making

process-Consulting with 3rd

parties

SAFEGUARDS

-Significance of relevant interests or

relationships-Significance

threats created

EVALUATE

- Interest and relationships

between the parties involved

- Implication for relevant parties

IDENTIFY

SECTION 310 – CONFLICTS OF

INTERESTDISCLOSE • Necessary to disclose the nature of the conflict

to the relevant parties

VERBAL• Disclosure is verbal, consent is verbal or

implied the PA is encouraged to document the nature of the circumstances giving rise to the COI

SECTION 320 – PREPARATION AND REPORTING OF INFORMATION

Involve in preparation and reporting of information shall do in fairly,honestly and accordance with professional standard.

Involve in preparation and approval of financial statement shall satisfied that FS presented accordance with financial reporting standard

SECTION 320 – PREPARATION AND REPORTING OF INFORMATION

Classifies and record in timely and proper.

Represent the fact accurately and completely.

SECTION 320 – PREPARATION AND REPORTING OF INFORMATION

Threats are created

Threats should be evaluated

Significance of threats

SECTION 330 – ACTING WITH SUFFICIENT

EXPERTISEFundamental principle professional competence needs to:

- Undertake significant tasks- Obtain specific training or experience

PA not intentionally mislead an employer to their level of expertise

SECTION 330 – ACTING WITH SUFFICIENT

EXPERTISE

Insufficient time to completing the duties

Inadequate information for performing duties

Inadequate resources for performance of the duties

Circumstances that create a threat to a PA in performing duties :

SECTION 330 – ACTING WITH SUFFICIENT

EXPERTISE • Obtaining additional

advice/training• Adequate time available

to performing duties

• Obtaining assistance from

someone with the necessary expertise

• Consulting with superiors within organization

• Consulting with independent experts

• To seek guidance from the institute.

SECTION 340 – FINANCIAL INTERESTS, COMPENSATION AND INCENTIVES

LINKED TO FINANCIAL REPORTING AND DECISION MAKING

• In certain circumstances, may create threats to comply with the fundamental principles.

Examples of circumstances that

may create self- interest threats:

• Direct/indirect financial interest• Profit related bonus• Directly/indirectly deferred

bonus• Compensation arrangements

SECTION 340 – FINANCIAL INTERESTS, COMPENSATION AND INCENTIVES

LINKED TO FINANCIAL REPORTING AND DECISION MAKING

Further compounded by:-Pressure from superiors or peers in the employing organization(participate in the same arrangements)

Self Interest threats from:

-compensa

tion-incentive arrangem

ents

-Alert to the principle of integrity-Straightforward and honest in all relationship

Professional

accountant shall :

-not manipula

te-use

confidential info

for personal gain or

for others.

SECTION 340 – FINANCIAL INTERESTS, COMPENSATION AND INCENTIVES

LINKED TO FINANCIAL REPORTING AND DECISION MAKING

EVALUATE

SAFEGUARDS

SIGNIFICANCE OF THREAT

S

-NATURE OF INTEREST-SIGNIFICANCE OF INTEREST(PERSONAL

CIRCUMSTANCES)

SECTION 340 – FINANCIAL INTERESTS, COMPENSATION AND INCENTIVES

LINKED TO FINANCIAL REPORTING AND DECISION MAKING

SAFEGUARDS

Up to date education on

ethical issues & on the legal restrictions.

Disclosure

Internal &External control

procedure

Policies & Procedures

Consultationwith superior

Consultation- employing

Organization/Professional

bodies

SECTION 350 – INDUCEMENTSRECEIVING

OFFERS1

• PA may be offered an inducement.

• Various forms

2 • Offers of inducement create threats

3• Encourage illegal or

dishonest behaviors or obtain confidential information.

4 • Existence & significance of any threats

5 • Significance of threats shall be evaluated & safeguards

SECTION 350 – INDUCEMENTSMAKING

OFFERS

1

-Expected or under pressure to offer inducement-To influence judgment-Obtain confidential information

2

-Come from within employing organizationExternal individual or organization-Suggestion actions or decisions that advantage for business-May influence

3

-PA shall not offer an inducement to improperly influence professional judgment of 3rd party

4

Pressure on unethical inducement from employing organization-PA must follow principles and guidance(Part A)