1 Topic 9 : Statements Of Professional Ethics Of HKSA

2 Statement 1.200: Four Fundamental Principles Underlying HKSA’s Ethics Statements Principle One : Integrity and objectivity Integrity ensures that the services provided by professional accountants will be performed honestly and fairly Objectivity imposes the obligation on all professional accountants to be fair, honest and free from bias and conflicts of interest

3 Statement 1.200: Fundamental Principles Underlying HKSA’s Ethics Statements Principle Two : Professional competence w Two separate phases: Attainment of professional competence through specific education and training in professionally relevant subjects; and Maintenance of professional competence through a continuing professional education and awareness of developments in the profession w Ensure the high quality of services in situations: Client’s short notice of a very tight deadline An assignment requires special technical competence Unreasonably low fee quotations in order to gain new business or retain old clients

4 Statement 1.200: Fundamental Principles Underlying HKSA’s Ethics Statements w Principle Three : Courtesy and consideration Including towards clients, employers as well as the society, representing the profession as a whole, and to fellow members of the profession and the general public

5 Statement 1.200: Fundamental Principles Underlying HKSA’s Ethics Statements w Principle Four: Following HKSA’s ethical guidelines Applicable to all members in the society, whether in public practice or not. Failure to follow the guidelines given by the statements does not of itself constitute misconduct, but means that the member concerned may be at risk of having to justify his actions in answer to a complaint A member should consult the society if he is in doubt in an ethical position by reference to the Fundamental Principles, Statements and Guidelines

6 Statement 1.200: Fundamental Principles Underlying HKSA’s Ethics Statements w Principles are drawn from the roles and responsibilities of professional accountants w Principles are framed in broad and general terms and constitute basic advice w Various statements constitute as rules and provide more detailed guidelines

Statement : Integrity, Objectivity And Independence Independent both in fact and in appearance Detailed discussion in topic 11

8 Statement 1.204A : Confidentiality w Information acquired in the course of work should NOT be used for other purposes w NOT be used for the advantages of self and third parties w May only be disclosed when: Disclosure is authorized by the client or the employer Disclosure is required by law There is a professional duty or right to disclose

9 Statement 1.204B : Unlawful Acts Or Defaults By Clients Of Members To be discussed in topic 12

10 Statement : Publicity And Advertising w Publicity is permitted : Consistent with the dignity of the profession NOT belittle or claim superiority over others Facts presented be verifiable Examples that publicity is not permitted: Publicity is NOT allowed: Direct mailing Unsolicited cold calling Advertising to offer professional services Commission, fee or reward for client referral

11 Statement : Publicity And Advertising w Publicity is permitted : Consistent with the dignity of the profession NOT belittle or claim superiority over others Facts presented be verifiable Examples that publicity is not permitted: Publicity is NOT allowed: Direct mailing Unsolicited cold calling Advertising to offer professional services Commission, fee or reward for client referral Make comparisions with other professionals Contain representations that likely to cause a reasonable person to misunderstand or be deceived Make unjustified claims to be an expert in a particular field of accountancy Include in promotional material references to fees

12 Statement : Publicity And Advertising w Publicity is permitted : Consistent with the dignity of the profession NOT belittle or claim superiority over others Facts presented be verifiable Examples that publicity is not permitted: Publicity is NOT allowed: Direct mailing Unsolicited cold calling Advertising to offer professional services Commission, fee or reward for client referral Undue influence and overreaching People may be deprived of a free and informed choice of professional services Criticizing other professionals and taking clients from them can reduce clients’ trust and undermine the value of accountancy services

13 Statement : Publicity And Advertising w Publicity is permitted : Consistent with the dignity of the profession NOT belittle or claim superiority over others Facts presented be verifiable Examples that publicity is not permitted: Publicity is NOT allowed: Direct mailing Unsolicited cold calling Advertising to offer professional services Commission, fee or reward for client referral Arguments for limiting advertising: Conception of professionals being devoted to public service May undermine public confidence in the profession May lead to boastfulness and self-laudatory However, advertising is allowed: Recruiting staff Promoting a seminar Introducing services to another professional adviser

14 Statement : Changes In A Professional Appointment w Nominated (Incoming) auditor Requesting client’s permission to communicate Obtaining professional clearance from existing auditor if he should be aware of any unusual circumstances surrounding the proposed change in determining his acceptance Decline nomination if the client fails to comply with relevant legislation in respect of the change or refuses permission to communicate to existing auditor w Existing (Outgoing) auditor Requesting client’s permission Providing clearance letter

15 Statement : Fees Fees should be charged Fee quotations and estimates Percentage and contingency fees are disallowed

16 Statement Fees should be charged Agreement of specific fees Calculated in accordance with any agreement Calculated by reference to the custom of the profession Fee quotations and estimates Percentage and contingency fees are disallowed

17 : Fees Statement : Fees Fees should be charged Fee quotations and estimates Inform client in writing of the basis of the purposed fees Improper to quote/charge a fee significantly lower than another Percentage and contingency fees are disallowed

18 Statement : Fees Fees should be charged Fee quotations and estimates Percentage and contingency fees are disallowed Contingence fees: fees to be paid only when the outcome is successful Contingence fees are not allowed as: It may perceived as a threat to objectivity, and change the professional-client relationship May encourage the member to do some unnecessary work in order to justify his worth

19 Statement : Management Consultancy Services w In the course of assisting or advising clients in any aspects of business management, the fundamental principles must be observed. In addition pay special attention to: Independence in making judgements Avoiding conflicts of interests Possessing skills and competence Exercising reasonable care Maintaining confidentiality

Statement : Ethics In Tax Practice w Observation of FOUR fundamental principles w NOT assure clients that tax returns and advice given are beyond challenge w NOT associate with any returns or documents that are misleading or likely to be false w Responsibility of the resignation w Material error or omission in prior year’s return Advise client and recommend to disclose to the IRD If client does not correct the error Cease to act for the client: not obligated to inform the error to the IRD without client’s consent Continue to act for the client: ensure the error will not repeat in subsequent returns

21 Statement : Clients’ Monies w Be strictly accountable to clients’ monies received w Be kept separately from all other monies and be applied for the purposes of the client only

Statement 1.290C : Unlawful Acts Or Defaults By Or On Behalf Of A member’s Employer To be discussed in topic 12

23 Statement 1.290D : Financial And Accounting Responsibilities Of Directors w Out of status and common law Acting honestly and in good faith Exercising skills and duty of care Statutory duty: keeping records and preparing accounts … w Conflict-of-interest situations Contracts with a vested interest Substantial asset disposals Financial involvement and share transactions...

24 Statement : Ethical Responsibilities Of Members In Business w Applicable to non-practising members only w Major ethical responsibilities Objectivity of professional judgment: avoid conflict of interest Technical and professional standards: familiar with professional pronouncements Duty of confidentiality to employers

25 Statement : Corporate Finance Advice w Covering a wide range of professional services that are proprietary in nature: Capital requirements, fund raising…. Takeovers, mergers, acquisition…. Refinancing, restructuring of debts, swaps…. w Major ethical requirements Objectivity and integrity Avoiding conflicts of interests Careful of serving different clients Duty of confidentiality