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Code of Ethics for Professional Accountants

Code of Ethics for Professional Accountants. Overview. Code of Ethics. Part A – Framework applies to all professional accountants Part B – Professional accountants in public practice Part C – Professional accountants in business. Fundamental Principles. Integrity

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Code of Ethics for Professional Accountants

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  1. Code of Ethics for Professional Accountants Overview

  2. Code of Ethics Part A – Framework applies to all professional accountants Part B – Professional accountants in public practice Part C – Professional accountants in business

  3. Fundamental Principles • Integrity • To be straight forward and honest in all professional and business relationships • Objectivity • To not allow bias, conflict of interest or undue influence of others to override professional or business judgments

  4. Fundamental Principles • Professional Competence and Due Care • To maintain professional knowledge and skill at the level required to ensure competent professional services based on current developments in practice, legislation and techniques • To act diligently in accordance with applicable technical and professional standards

  5. Fundamental Principles • Confidentiality • To refrain from disclosing confidential information acquired as a result of professional and business relationships without proper and specific authority to disclose unless there is a legal or professional right or duty to disclose • To refrain from using confidential information acquired as a result of professional and business relationships for personal advantage or the advantage of third parties

  6. Fundamental Principles • Professional behavior • Obligation to comply with relevant laws and regulations and avoid any action that discredits the profession

  7. Conceptual Framework Approach – Threats and Safeguards

  8. Conceptual Framework Approach • Requires active consideration of issues • Establishes basic principles • Can be applied to differing circumstances • Responsive to rapid change • Requires judgment rather than literal interpretations encouraged by a pure rules approach

  9. Threats • Self-interest • Self-review • Advocacy • Familiarity • Intimidation

  10. Safeguards Two categories: • Created by the profession, legislation or regulation • In the work environment

  11. Prohibitions When safeguards are never adequate

  12. Part B – Professional Accountants in Public Practice • Professional Appointment • Conflicts of Interest • Second Opinions • Fees and Other Types of Remuneration • Marketing Professional Services • Gifts and Hospitality • Custody of Client Assets • Objectivity – All Services • Independence – Audit and Review Engagements • Independence – Other Assurance Engagements

  13. Independence for Audit and Review Engagements • Firm includes network firm, except where otherwise stated • Independence of mind and independence in appearance • Public interest entities: additional provisions in Section 290 that reflect the extent of public interest in certain entities

  14. Independence for Audit and Review Engagements – cont’d • Documentation: conclusions regarding compliance with independence requirements, and substance of any relevant discussions that support those conclusions

  15. Independence for Audit and Review Engagements – cont’d • Financial interests • Loans and guarantees • Business relationships • Family and personal relationships • Employment with an audit client • Temporary staff assignments

  16. Independence for Audit and Review Engagements – cont’d • Recent service with an audit client • Serving as a director or officer of an audit client • Long association of senior personnel (including partner rotation) with an audit client

  17. Independence for Audit and Review Engagements – cont’d • Provision of non-assurance services to audit clients • Management responsibilities • Preparing accounting records and financial statements • Valuation services • Taxation services • Internal audit services

  18. Independence for Audit and Review Engagements – cont’d • Provision of non-assurance services to audit clients • IT systems services • Litigation support services • Legal services • Recruiting services • Corporate finance services

  19. Independence for Audit and Review Engagements – cont’d Fees Compensation and evaluation policies Actual or threatened litigation Reports that include a restriction on use or distribution

  20. Independence for Other Assurance Engagements Assurance engagements that are not audit or review engagements Include related entities when reason to believe relevant to independence Include network firms when reason to believe relevant to independence

  21. Independence for Other Assurance Engagements • Assertion-based assurance engagements • Independence required from assurance client (party responsible for the subject matter information, and which may be responsible for the subject matter) • When client not responsible for subject matter evaluate the threats firm has reason to believe created by interests and relationships with party responsible for subject matter • Direct reporting engagements • Independence required from assurance client (party responsible for the subject matter)

  22. Independence for Other Assurance Engagements • Multiple responsible parties • Firm may take into account whether interest or relationship with a particular responsible party creates a threat. Consider: • Materiality of subject matter information (or subject matter) for which the particular responsible party is responsible • Degree of public interest associated with engagement

  23. Part C – Professional Accountants in Business • Potential conflicts • Preparation and reporting of information • Acting with sufficient expertise • Financial interests • Inducements

  24. Effective Date • January 1, 2011 • Transitional provisions • Public interest entities • Partner rotation • Non-assurance services • Fees – relative size • Compensation and evaluation policies

  25. International Federation of Accountants www.ifac.org

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