overview of the code

International Federation of Accountants
Code of Ethics for Professional Accountants

Overview


International Federation of Accountants

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
– 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


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


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


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


Conceptual Framework Approach – Threats and Safeguards


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


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


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


Prohibitions
When safeguards are never adequate


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


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


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

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


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


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


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


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


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


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)


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


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

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


International Federation of
Accountants
www.ifac.org