Professional ethics for accountants
Menu
an introduction to the code
THIS SECTION OF THE LEARNING MODULE FOCUSES ON introducing students to the code.
An outline of the code is provided and part a of the code is considered in detail.
APES 110 (the Code) is issued by the Accounting Professional and Ethical Standards Board (APESB). In the same way that AASB accounting standards are consistent with the IFRS/IAS international equivalents, the Code is also consistent with the international equivalent (the IAESB Code).
The Code is mandatory for all Members of CAANZ and CPA Australia and non compliance can lead to disciplinary proceedings.
The Code is principles based (as opposed to rules based) and Members should be guided not only by the terms of the Code, but also by its spirit and be prepared to justify to their professional body any apparent departure from the provisions and spirit of the Code.
A complete version of the Code can be downloaded from the APESB website here. Please be aware that you are not required to download and read the entire Code, but may find some sections useful.
The following document, produced by CPA Australia, contains a summary of the Code. You should download a copy of this document now.
The Code is mandatory for all Members of CAANZ and CPA Australia and non compliance can lead to disciplinary proceedings.
The Code is principles based (as opposed to rules based) and Members should be guided not only by the terms of the Code, but also by its spirit and be prepared to justify to their professional body any apparent departure from the provisions and spirit of the Code.
A complete version of the Code can be downloaded from the APESB website here. Please be aware that you are not required to download and read the entire Code, but may find some sections useful.
The following document, produced by CPA Australia, contains a summary of the Code. You should download a copy of this document now.
an-overview-of-apes-110-code-of-ethics.pdf | |
File Size: | 192 kb |
File Type: |
The CPA Australia overview identifies that the Code has three parts:
A: General application of the Code
B: Members in public practice
C: Member in business
The remainder of this module limits the discussion to Part A of the Code. In addition to stating the requirement for accountants to act in the 'public interest', as discussed earlier, Part A also set out the following five fundamental ethical principles, which Members must adhere to at all times. The conceptual framework approach adopted by the Code is explained and threats to the fundamental ethical principles are discussed, as well as safeguards to reduce the threats to an acceptable level. Pages 5-9 of the CPA summary document above explain these in more detail and you should ensure that you have read and understood these sections.
The five fundamental ethical principles are discussed in more detail below:
1. Integrity
The principle of integrity imposes an obligation on Members to be straightforward and honest in all professional and business relationships.
Integrity also implies fair dealing and truthfulness.
To ensure that Members are complying with this principle the Code specifies that a Member shall not knowingly be associated with reports, returns, communications or other information where the Member believes that the information:
When a Member becomes aware that they have been associated with such information, the Member shall take steps to be disassociated from that information.
2. Objectivity
The principle of objectivity imposes an obligation on Members to not allow bias, conflict of interest or undue influence of others to override professional or business judgments.
3. Professional Competence and Due Care
The principle of professional competence and due care imposes an obligation on Members to:
Competent Professional Service requires the exercise of sound judgment in applying professional knowledge and skill in the performance of such service.
Professional competence may be divided into two separate phases:
The maintenance of professional competence requires a continuing awareness and an understanding of relevant technical, professional and business developments. Continuing professional development enables a Member to develop and maintain the capabilities to perform competently within the professional environment.
Diligence encompasses the responsibility to act in accordance with the requirements of an assignment, carefully, thoroughly and on a timely basis.
4. Confidentiality
The principle of confidentiality imposes an obligation on Members to respect the confidentiality of information acquired as a result of professional and business relationships and, therefore, not disclose any such information to third parties without proper and specific authority, unless there is a legal or professional right or duty to disclose, nor use the information for the personal advantage of the Member or third parties.
The principle of confidentiality imposes an obligation on all Members to refrain from:
Members are required to maintain confidentiality, including in a social environment, being alert to the possibility of inadvertent disclosure, particularly to a close business associate or a family member.
The principle of confidentiality extends to information disclosed by a prospective client or employer. Similarly, the need to comply with the principle of confidentiality continues even after the end of relationships between a Member and a client or employer.
The following are circumstances where Members are or may be required to disclose confidential information or when such disclosure may be appropriate:
- Disclosure to the appropriate public authorities of infringements of the law that come to light; and
3. There is a professional duty or right to disclose, when not prohibited by law:
- To comply with the quality review of a member body or professional body;
- To respond to an inquiry or investigation by a member body or regulatory body;
- To protect the professional interests of a Member in legal proceedings; or
- To comply with technical standards and ethics requirements.
5. Professional behaviour
The principle of professional behaviour imposes an obligation on Members to comply with relevant laws and regulations and avoid any action (or omission) that discredits the profession.
This includes actions or omissions that a reasonable and informed third party, weighing all the specific facts and circumstances available to the Member at that time, would be likely to conclude adversely affects the good reputation of the profession.
A: General application of the Code
B: Members in public practice
C: Member in business
The remainder of this module limits the discussion to Part A of the Code. In addition to stating the requirement for accountants to act in the 'public interest', as discussed earlier, Part A also set out the following five fundamental ethical principles, which Members must adhere to at all times. The conceptual framework approach adopted by the Code is explained and threats to the fundamental ethical principles are discussed, as well as safeguards to reduce the threats to an acceptable level. Pages 5-9 of the CPA summary document above explain these in more detail and you should ensure that you have read and understood these sections.
The five fundamental ethical principles are discussed in more detail below:
1. Integrity
The principle of integrity imposes an obligation on Members to be straightforward and honest in all professional and business relationships.
Integrity also implies fair dealing and truthfulness.
To ensure that Members are complying with this principle the Code specifies that a Member shall not knowingly be associated with reports, returns, communications or other information where the Member believes that the information:
- Contains a materially false or misleading statement;
- Contains statements or information furnished recklessly; or
- Omits or obscures information required to be included where such omission or obscurity would be misleading.
When a Member becomes aware that they have been associated with such information, the Member shall take steps to be disassociated from that information.
2. Objectivity
The principle of objectivity imposes an obligation on Members to not allow bias, conflict of interest or undue influence of others to override professional or business judgments.
3. Professional Competence and Due Care
The principle of professional competence and due care imposes an obligation on Members to:
- maintain professional knowledge and skill at the level required to ensure that a client or employer receives competent Professional Services based on current developments in practice, legislation and techniques; and
- act diligently and in accordance with applicable technical and professional standards.
Competent Professional Service requires the exercise of sound judgment in applying professional knowledge and skill in the performance of such service.
Professional competence may be divided into two separate phases:
- Attainment of professional competence; and
- Maintenance of professional competence.
The maintenance of professional competence requires a continuing awareness and an understanding of relevant technical, professional and business developments. Continuing professional development enables a Member to develop and maintain the capabilities to perform competently within the professional environment.
Diligence encompasses the responsibility to act in accordance with the requirements of an assignment, carefully, thoroughly and on a timely basis.
4. Confidentiality
The principle of confidentiality imposes an obligation on Members to respect the confidentiality of information acquired as a result of professional and business relationships and, therefore, not disclose any such information to third parties without proper and specific authority, unless there is a legal or professional right or duty to disclose, nor use the information for the personal advantage of the Member or third parties.
The principle of confidentiality imposes an obligation on all Members to refrain from:
- Disclosing outside the Firm or employing organisation confidential information acquired as a result of professional and business relationships without proper and specific authority or unless there is a legal or professional right or duty to disclose; and
- Using confidential information acquired as a result of professional and business relationships to their personal advantage or the advantage of third parties.
Members are required to maintain confidentiality, including in a social environment, being alert to the possibility of inadvertent disclosure, particularly to a close business associate or a family member.
The principle of confidentiality extends to information disclosed by a prospective client or employer. Similarly, the need to comply with the principle of confidentiality continues even after the end of relationships between a Member and a client or employer.
The following are circumstances where Members are or may be required to disclose confidential information or when such disclosure may be appropriate:
- Disclosure is permitted by law and is authorised by the client or the employer;
- Disclosure is required by law, for example:
- Disclosure to the appropriate public authorities of infringements of the law that come to light; and
3. There is a professional duty or right to disclose, when not prohibited by law:
- To comply with the quality review of a member body or professional body;
- To respond to an inquiry or investigation by a member body or regulatory body;
- To protect the professional interests of a Member in legal proceedings; or
- To comply with technical standards and ethics requirements.
5. Professional behaviour
The principle of professional behaviour imposes an obligation on Members to comply with relevant laws and regulations and avoid any action (or omission) that discredits the profession.
This includes actions or omissions that a reasonable and informed third party, weighing all the specific facts and circumstances available to the Member at that time, would be likely to conclude adversely affects the good reputation of the profession.
Activity 4:
For each of the three following scenarios determine which of the fundamental ethical principles are at risk of being breached.
For each of the three following scenarios determine which of the fundamental ethical principles are at risk of being breached.
Scenarios
- Joe is the accountant for a large chain of health clubs. Joe's brother has decided to set up his own rival chain and has asked Joe to become finance director. However, as a condition he has asked Joe to provide him with the database of member's details from his current employer.
- Sally is a junior accountant. She is aware that her manager never checks her work very carefully - so has determined that there is little risk of getting into trouble for making mistakes. Sally has been asked to prepare a report for a client. Due to personal commitments that meant that Sally was keen to leave work 'on time' she quickly prepared the report and emailed it to her manager without checking that the complex calculations she had performed were correct.
- Peter is an accountant for a training organisation. Peter's manager has told him that monthly management accounts need to be completed within three days of month end. The manager has told Peter that in order to ensure that this is achieved he will have to estimate certain account balances, including sales revenue and accounts receivable.
You should now move to the next tab "Resolving ethical issues"