TABLE 6.1 Essential Features (Bayles) WHAT MAKES A PROFESSION Extensive training Provision of important services to society Training and skills largely intellectual in character Typical Features Generally licensed or certified Represented by organisations, associations, or institutes Autonomy Foundation of Ethical Values (Behrman) Significantly delineated by and founded on ethical considerations rather than techniques or tools

TABLE 6.2 FEATURES, DUTIES, RIGHTS, & VALUES OF THE ACCOUNTING PROFESSION Features Provision of important fiduciary services to society Extensive knowledge and skill are required Training and skills required are largely intellectual in character Overseen by self-regulating membership organisations Accountable to governmental authority Duties essential to a fiduciary relationship Continuing attention to the needs of clients and other stakeholders Development and maintenance of required knowledge and skills, including professional scepticism Maintenance of the trust inherent in a fiduciary relationship by behaviour exhibiting responsible values Maintenance of an acceptable personal reputation Maintenance of a credible reputation as a profession Rights permitted in most jurisdictions Ability to hold oneself out as a designated professional to render important fiduciary services Ability to set entrance standards and examine candidates Self-regulation and discipline based on codes of conduct Participation in the development of accounting and audit practice Access to some or all fields of accounting and audit endeavour Values necessary to discharge duties and maintain rights Honesty Integrity Objectivity, based on independent judgement Desire to exercise due care and professional scepticism Competence Confidentiality Commitment to place the needs of the public, the client, the profession, and the employer or firm before the professional's own self-interest

TABLE 6.3 MOTIVES INFLUENCING PEOPLE AT KOHLBERG’S SIX STAGES OF MORAL REASONING STAGE DESCRIPTION MOTIVE FOR DOING RIGHT Preconventional Self-interest 1. Obedience Fear of punishment and authorities 2. Egotism–instrumental and social exchange Self-gratification, concern only for oneself “Let’s make a deal” Conventional Conformity 3. Interpersonal concordance Role expectation or approval from others 4. Law and duty (social order) Adherence to moral codes, or to codes of law and order Post-conventional, Autonomous, or Principled Interests of Others 5. General individual rights and standards agreed upon by society Concern for others and broader social welfare 6. Self-chosen principles Concern for moral or ethical principle

TABLE 6.4 NATIONAL & INTERNATIONAL ACCOUNTING ORGANIZATIONS OPERATING IN NORTH AMERICA NAME DESIGNATION PRIME MANDATE(S) LOCATION American Institute of Certified Public Accountants (AICPA) CPA Auditing, management accounting United States Institute of Management Accountants (IMA) CMA Management accounting Chartered Professional Accountants of Canada (CPAC) Canada Association of Chartered Certified Accountants (ACCA) ACCA Accounting education International

TABLE 6.5 CONTRIBUTIONS TO THE NORTH AMERICAN REGULATORY FRAMEWORK FOR PROFESSIONAL ACCOUNTANTS ORGANIZATION CONTRIBUTION GOVERNING ORGANIZATION’S MEMBERS/USERS American Institute of Certified Public Accountants (AICPA) CPA designation, statements of Auditing Standards (SAS), research studies, journal articles, code of conduct Association of Accountants and Financial Professionals in Business (IMA) CMA designation, statements of accounting practice, research studies, Financial Accounting Standards Board (FASB) Financial Accounting Standards (FAS) Chartered Professional Accountants of Canada (CPAC) CPA designation, accounting and auditing standards in Canada, research studies, journal articles, code of conduct U.S. Securities and Exchange Commission (SEC) Regulations related to U.S. public securities markets including corporate disclosure and governance, GAAP, GAAS, behavior of auditors and other professionals practicing before the SEC. Regulation in respect to disclosure for companies raising funds in the USA. Standards of independence for CPAs auditing SEC companies. Ontario Securities Commission (OSC) Regulations related to financial disclosure in Canada's principal securities market (Ontario), whose regulations are accepted by the SEC. U.S. and Canadian courts Common law decisions affecting legal liability International Federation of Accountants (IFAC): International Ethics Standards Board for Accountants (IESBA) International Auditing and Assurance Board (IAASB) International Accounting Standards Board (IASB) International Financial Reporting Standards Foundation (IFRS) Promotes global harmonization of standards International Code of Ethics Auditing Standards (ISA) Accounting and auditing standards (IAS) IFRs, IFRIC, SIC Public Accounting Oversight Boards PCAOB CPAB Oversight in the U.S. (PCAOB) and Canada (CPAB) Issues Auditing Standards (U.S.), inspections, sanctions Inspection reports, sanctions

TABLE 6.6 Introduction and purpose TYPICAL FRAMEWORK FOR A CODE OF CONDUCT FOR PROFESSIONAL ACCOUNTANTS Introduction and purpose Fundamental principles, standards, and risk assessment approach General rules applicable to public practice, and in business Specific rules applicable to public practice, and in business Discipline Interpretations of rules

TABLE 6.7 Members should: act in the public interest, FUNDAMENTAL PRINCIPLES IN CODES OF CONDUCT FOR PROFESSIONAL ACCOUNTANTS Members should: act in the public interest, at all times maintain the good reputation of the profession and its ability to serve the public interest, perform with: integrity objectivity & independence professional competence, due care, and professional skepticism confidentiality, not be associated with any misleading information or misrepresentation, and continually assess the risk of faling to observe those principles

TABLE 6.8 IFAC 2015 CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS: FUNDAMENTAL PRINCIPLES & CONCEPTUAL RISK MANAGEMENT FRAMEWORK Fundamental Principles (Section 100.5) A professional accountant shall comply with the following fundamental principles: (a) Integrity – to be straightforward and honest in all professional and business relationships. (b) Objectivity - to not allow bias, conflict of interest or undue influence of others to override professional or business judgments. (c) Professional Competence and Due Care - 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, act diligently and in accordance with applicable technical and professional standards. (d) Confidentiality - to respect the confidentiality of information acquired as a result of professional and business relationships and should 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 for the personal advantage of the professional accountant or third parties. (e) Professional Behavior - to comply with relevant laws and regulations and avoid any action that discredits the profession. Conceptual Risk Management Framework (Sections 100.17-.25) The IFAC Code also establishes a conceptual risk management framework and requires professional accountants to “identify, evaluate, and address threats to compliance with the fundamentals.” (Sec. 100.6) In so doing, the professional accountant must take into account any safeguards created by the profession, legislation, regulation or in the work environment. (Sec. 100.13) The 2015 IFAC Code also identifies conflicts of interest as a major threat to be considered, and specifies conflict resolution and reporting steps.

TABLE 6.9 POSSIBLE SANCTIONS FOR UNETHICAL BEHAVIOR UNDER PROFESSIONAL ACCOUNTING CODES OF CONDUCT & REGULATORY AUTHORITIES LEVIABLE ON THE PROFESSIONAL ACCOUNTING FIRM Caution Yes Reprimand Review by peer Requirement to complete courses No Suspension: for a specified period for an indefinite period until specific requirements are completed from appearing before regulatory agencies (SEC, OSC) from auditing SEC or OSC registrant companies No/Yes* Expulsion from membership Compensation for damage Fine Costs of hearing Ancillary orders for community work financial support, etc. . * The SEC has suspended a firm’s ability to audit SEC registrants and/or take on new clients Source: Distillation of discipline cases from North American jurisdictions

TABLE 6.10 IFAC 2015 CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS TABLE OF CONTENTS Page PREFACE..................................................................................................................................... 2 PART A: GENERAL APPLICATION OF THE CODE 100 Introduction and Fundamental Principles ................................................................. 9 110 Integrity ...................................................................................................................... 16 120 Objectivity ................................................................................................................... 17 130 Professional Competence and Due Care.................................................................. 18 140 Confidentiality ............................................................................................................ 19 150 Professional Behavior ................................................................................................ 21 PART B: PROFESSIONAL ACCOUNTANTS IN PUBLIC PRACTICE 200 Introduction.................................................................................................................. 23 210 Professional Appointment........................................................................................... 28 220 Conflicts of Interest ..................................................................................................... 32 230 Second Opinions ......................................................................................................... 38 240 Fees and Other Types of Remuneration..................................................................... 39 250 Marketing Professional Services................................................................................. 41 260 Gifts and Hospitality .................................................................................................... 42 270 Custody of Clients Assets .......................................................................................... 43 280 Objectivity–All Services.............................................................................................. 44 290 Independence–Audit and Review Engagements ....................................................... 45 291 Independence–Other Assurance Engagements ………………………………………. 105 PART C: PROFESSIONAL ACCOUNTANTS IN BUSINESS 300 Introduction...................................................................................................................138 310 Potential Conflicts........................................................................................................ 142 320 Preparation and Reporting of Information .................................................................. 145 330 Acting with Sufficient Expertise................................................................................... 147 340 Financial Interests ...................................................................................................... 148 350 Inducements ............................................................................................................... 150 DEFINITIONS............................................................................................................................... 152 EFFECTIVE DATE....................................................................................................................... 161

FIGURE 6.1 IFAC 2015 CODE OF ETHICS CONCEPTUAL FRAMEWORK APPROACH Duty to Society, Serve the Public Interest (S 100.1) Compliance with Fundamental Principles Integrity, Objectivity Professional Competence & Due Care Confidentiality, Professional Behavior (S 100.5) Conceptual Framework Approach To Assessing Threats to Compliance with Fundamental Principles Identify, Evaluate, Eliminate or Reduce Threats to Acceptable Levels by Applying Safeguards And Resolving any Conflicts in Application Threats (S 100.12) Safeguards (S 100.13-.14) Self-Interest, Self-review Professional Codes, Training or Standards Advocacy, Familiarity, Intimidation Legislation, Regulation, In Client, Firm or Business (S 100.6-.9) (S 100.10-.11) Source: IFAC Code of Ethics for Professional Accountants, April 15, 2016 (Section number).

TABLE 6.11 THREATS TO NONCOMPLIANCE – AICPA CODE Sections 1.000.010.10-.16 Compliance with fundamental principles may be threatened by a broad range of circumstances. Many threats fall into the following categories: Adverse interest threat: that a member will not act with objectivity because the member’s interests are opposed to the client’s interests. Self-interest threat: that a member could benefit, financially or otherwise, from an interest in, or relationship with, a client or persons associated with the client. Self-review threats: that a member will not appropriately evaluate the results of a previous judgment made or service performed or supervised by the member or an individual in the member’s firm and that the member will rely on that service in forming a judgment as part of another. Management participation threat: that a member will take on the role of client management or otherwise assume management responsibilities, such may occur during an engagement to provide nonattest services. Advocacy threat: that a member will promote a client’s interests or position to the point that his or her objectivity or independence is compromised. Familiarity threat: that, due to a long or close relationship with a client, a member will become too sympathetic to the client’s interests or too accepting of the client’s work or product. Intimidation threats/Undue influence threat: that a member will subordinate his or her judgment to an individual associated with a client or any relevant third party due to that individual’s reputation or expertise, aggressive or dominant personality, or attempts to coerce or exercise excessive influence over the member. IFAC 2015 Code of Ethics for Professional Accountants, Section 100.12 AICPA 2015 Code of Professional Conduct, Sections 1.000.010.08-.16 CPAO 2015 Code of Professional Conduct, Sections 204.3

TABLE 6.12 SAFEGUARDS REDUCING THE RISK OF CONFLICT OF INTEREST SITUATIONS Safeguards Created by the Profession, Legislation, or Regulation AICPA Code S 1.000.010 & IFAC Code S 100.14 Education, training, experience requirement for entry Continuing education Professional standards, monitoring, and disciplinary processes External review by a legally empowered third party of reports, returns, communications or information produced by a professional accountant. External review of firm’s quality control system Legislation governing independence requirements of the firm Competency and experience requirements for professional licensure Professional resources, such as hotlines, for consultation on ethical issues Safeguards implemented by a Client AICPA Code S1.000.010 & IFAC Code 200.15 The client has personnel with suitable skill, knowledge, or experience who make managerial decisions about the delivery of professional services and makes use of third-party resources for consultation as needed. The tone at the top emphasizes the client’s commitment to fair financial reporting and compliance with the applicable laws, rules, regulations, and corporate governance policies. Policies and procedures are in place to achieve fair financial reporting and compliance with the applicable laws, rules, regulations, and corporate governance policies. Policies and procedures are in place to address ethical conduct. A governance structure, such as an active audit committee, is in place to ensure appropriate decision making, oversight, and communications regarding a firm’s services. Policies are in place that bar the entity from hiring a firm to provide services that do not serve the public interest or that would cause the firm’s independence or objectivity to be considered impaired. Safeguards Implemented by a Firm AICPA Code S 1.000.010 & IFAC Code, Parts B & C Firm leadership stresses the importance of complying with the rules and the expectation that engagement teams will act in the public interest. Policies and procedures that are designed to implement and monitor engagement quality control. Documented policies regarding the identification of threats to compliance with the rules, the evaluation of the significance of those threats, and the identification and application of safeguards that can eliminate identified threats or reduce them to an acceptable level. Internal policies and procedures that are designed to monitor compliance with the firm’s policies and procedures. Policies & procedures designed to identify interests or relationships between the firm or its partners & professional staff & the firm’s clients. The use of different partners, partner equivalents, and engagement teams from different offices or that report to different supervisors. Training on, and timely communication of, a firm’s policies and procedures and any changes to them for all partners and professional staff. Policies and procedures that are designed to monitor the firm’s, partner’s, or partner equivalent’s reliance on revenue from a single client and that, if necessary, trigger action to address excessive reliance 18 additional safeguards are listed – see AICPA Code S 0.100.010. 23

Protect the Public Interest Professional Service to Clients FIGURE 6.2 IFAC CODE’S FRAMEWORK FOR INDEPENDENT JUDGMENT Protect the Public Interest Professional Service to Clients Independence of Mind and Appearance (S 290.8) Independent Judgment Integrity Objectivity Professional Skepticism Source: IFAC Code of Ethics for Professional Accountants, 2005, S 290.8 & Independence Definition

TABLE 6.13 CONFLICTS OF INTEREST EXAMPLES – 2015 AICPA CODE Section 1.110.010.04 Providing corporate finance services to a client seeking to acquire an audit client of the firm, when the firm has obtained confidential information during the course of the audit that may be relevant to the transaction Advising two clients at the same time who are competing to acquire the same company when the advice might be relevant to the parties’ competitive positions Providing services to both a vendor and a purchaser who are clients of the firm in relation to the same transaction Preparing valuations of assets for two clients who are in an adversarial position with respect to the same assets Representing two clients at the same time regarding the same matter who are in a legal dispute with each other, such as during divorce proceedings or the dissolution of a partnership Providing a report for a licensor on royalties due under a license agreement while at the same time advising the licensee of the correctness of the amounts payable under the same license agreement Advising a client to invest in a business in which, for example, the immediate family member of the member has a financial interest in the business Providing strategic advice to a client on its competitive position while having a joint venture or similar interest with a competitor of the client Advising a client on the acquisition of a business which the firm is also interested in acquiring Advising a client on the purchase of a product or service while having a royalty or commission agreement with one of the potential vendors of that product or service Providing forensic investigation services to a client for the purpose of evaluating or supporting contemplated litigation against another client of the firm Providing tax or personal financial planning services for several members of a family whom the member knows to have opposing interests Referring a personal financial planning or tax client to an insurance broker or other service provider, which refers clients to the member under an exclusive arrangement

TABLE 6.14 CONFLICTS OF INTEREST FOR PROFESSIONAL ACCOUNTANTS: A STAKEHOLDER IMPACT ANALYSIS STAKEHOLDER CATEGORY SPHERE OF ACTIVITY AFFECTED EXAMPLES Self vs. others Services offered Improper use of influence Misuse of information Conflicting services, shaving quality Improper purchases of client goods Improper investments by relatives Self & others vs. others Overinvolvement with management or directors erodes objectivity Client vs. client Employer vs. employer Serving competing clients or competing employers at the same time Stakeholder vs. stakeholder Misuse of information (confidentiality) Whistle-blowing, reporting to government or regulators

IFAC 2001 CODE OF ETHICS VALUES FRAMEWORK Serve the Public Interest Duty to Society, Serve the Public Interest Objectives Meet Expectations for Professionalism, Performance, Public Interest Basic Needs Credibility, Professionalism, Highest Quality Services, Confidence Fundamental Principles Integrity, Objectivity, Professional Competence, Due Care, Skepticism, Confidentiality, Professional Behavior, Technical Standards Source: IFAC, November, 2001.