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 [...]... 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... 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... 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... 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... 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... 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... • 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