We shall continue our discussion today on the current/emerging tax issues by focusing on other aspects of International Ethics Standards Board for Accountants (IESBA) to guide corporate and individual taxpayers of the impacts on their businesses
Part A of the IESBA Code
establish the:
- fundamental principles of professional ethics for professional accountants; and
- provides a conceptual framework that professional accountants shall apply to:
(a) Identify threats to compliance with the fundamental principles;
(b) Evaluate the significance of the threats identified; and
(c) Apply safeguards, when necessary, to eliminate the threats or reduce them to an acceptable level. Safeguards are necessary when the professional accountant determines that the threats are not at a level at which a reasonable and informed third party would be likely to conclude, weighing all the specific facts and circumstances available to the professional accountant at that time, that the compliance with the fundamental principles is not compromised.
Parts B and C describe how the conceptual framework applies in certain situations. They provide examples of safeguards that may be appropriate to address threats to compliance with the fundamental principles. They also describe situations where safeguards are not available to address the threats, and consequently, the circumstance or relationship creating the threats shall be avoided. Part B applies to professional accountants in public practice while part C applies to professional accountants in business.
Fundamental Principles
A professional accountant shall comply with the following fundamental principles.
(a) Integrity: The principle of integrity imposes an obligation on all professional accountants to be straight forward and honest in all professional and business relationships. Integrity implies fair dealing and thruthfulness.
(b) Objectivity: This principle imposes an obligation on all professional accountant not to allow bias, conflict of interest or undue influence of others to override professional or business judgements.
(c) Professional competence and Due Care: The principle of professional competence and due care imposes the following obligations on all professional accountants:
(i) to maintain professional knowledge and skill at the level required to ensure that a client or employer receives competent professional service based on current developments in practice, legislation and techniques and act diligently and in accordance with the applicable and professional standards; and
(ii) to act diligently in accordance with the applicable technical and professional standards when performing professional activities or providing professional services.
Competent professional services 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:
(a) attainment of professional competence; and
(b) maintenance of professional competence.
Care/diligence encompasses the responsibility to act in accordance with the requirements of an assignment, carefully, thoroughly and timely.
(d) Confidentiality – This principle imposes an obligation on all professional accountants to refrain from:
(i) Disclosing outside the firm or employing organisation confidential information acquired as a result of professional and business relationship without proper and specific authority or unless there is a legal or professional right or duty to disclose; and
(ii) Using confidential information acquired as a result of professional and business relationships to their personal advantage or the advantage of third parties.
(e) Professional Behaviour – this principle imposes an obligation on all professional accountants to comply with the relevant laws and regulations and avoid any action that discredits the profession.
Conceptual Framework Approach
This IESBA code establishes a conceptual framework that requires a professional accountant to identify, evaluate and address threats to compliance with the fundamental principles. The conceptual framework approach assists professional accountants in complying with the ethical requirements of this code and meeting their responsibility to act in the public interest
When a professional accountant identifies threats to compliance with the fundamental principles and, based on an evaluation of those threats, determines, that they are not at an acceptable level, the professional accountant shall determine whether appropriate safeguards are available and can be applied to eliminate the threats or reduce them to an acceptable level.
A professional accountant shall evaluate any threats to compliance with the fundamental principles when the professional accountant knows, or could reasonably be expected to know, of circumstances or relationships that may compromise compliance with the fundamental principles.
A professional accountant shall take qualitative as well as quantitative factors into account when evaluating the significance of a threat. When applying the conceptual framework, a professional accountant may encounter situations in which threats cannot be eliminated or reduced to an acceptable level, either because, the threat is too significant or because appropriate safeguards are not available or cannot be applied. In such situations, the professional accountant shall decline or discontinue the specific professional activity or service involved or, when necessary, resign from the engagement or the employing organisation.
We shall continue with the other aspects of IESBA in the next publication.
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