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

• 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

Fundamental Principles

Conceptual Framework Approach – Threats and Safeguards

• 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

Conceptual Framework Approach

• Self-interest

• Self-review

• Advocacy

• Familiarity

• Intimidation

Threats

Two categories:

• Created by the profession, legislation or regulation

• In the work environment

Safeguards

When safeguards are never adequate

Prohibitions

• 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

Part B – Professional Accountants in Public Practice

• 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

• 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 Audit and Review Engagements – cont’d

• 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

Independence for Other Assurance Engagements

• Potential conflicts

• Preparation and reporting of information

• Acting with sufficient expertise

• Financial interests

• Inducements

Part C – Professional Accountants in Business

• January 1, 2011

• Transitional provisions

– Public interest entities

– Partner rotation

– Non-assurance services

– Fees – relative size

– Compensation and evaluation policies

Effective Date

International Federation of Accountantswww.ifac.org