International Federation of Accountants Code of Ethics - An overview Jan Munro, Senior Technical Manager REPARIS Workshops on Accounting and Audit Regulation Vienna, Austria March 14-15, 2006

Code of Ethics Part A – framework applies to all professional accountantsPart A – framework applies to all professional accountants Part B – professional accountants in public practicePart B – professional accountants in public practice Part C – professional accountants in businessPart C – professional accountants in business

Conceptual framework Requires active consideration of issuesRequires active consideration of issues Can be applied to differing circumstancesCan be applied to differing circumstances Responsive to rapid changeResponsive to rapid change Establishes basic principlesEstablishes basic principles Rules approach can encourage literal interpretationRules approach can encourage literal interpretation

Fundamental Principles Integrity –Should be straightforward and honest in all professional and business relationships\ –Fair dealing and truthfulness Accountants should not be associated with information that is false and misleadingAccountants should not be associated with information that is false and misleading

Fundamental Principles (cont’d) Objectivity –Should not allow bias, conflict of interest or undue influence of others to override professional or business judgments Should avoid relationships that bias or unduly influence professional judgmentShould avoid relationships that bias or unduly influence professional judgment

Fundamental Principles (cont’d) Professional Competence and Due Care –Professional knowledge and skill at level required to ensure competent services Attainment and maintenance of professional competenceAttainment and maintenance of professional competence Continuing professional developmentContinuing professional development

Fundamental Principles (cont’d) Professional Competence and Due Care –Act diligently in accordance with applicable technical and professional standards Those working under accountant’s authority should have appropriate training and supervisionThose working under accountant’s authority should have appropriate training and supervision Accountant should make clients, employers or other users of professional services aware of limitations inherent in services to avoid misinterpretation of an expression of opinion as an assertion of factAccountant should make clients, employers or other users of professional services aware of limitations inherent in services to avoid misinterpretation of an expression of opinion as an assertion of fact

Fundamental Principles (cont’d) Confidentiality –Should not disclose confidential information acquired as a result of professional/business relationship without proper authority to disclose unless professional right or duty to disclose Disclosure is permitted by law and is authorized by client or employerDisclosure is permitted by law and is authorized by client or employer Disclosure is required by lawDisclosure is required by law Professional duty or right to discloseProfessional duty or right to disclose

Fundamental Principles (cont’d) Confidentiality –Should not use confidential information for personal advantage or advantage of third parties Confidentiality to be maintained even in a social environmentConfidentiality to be maintained even in a social environment Need to comply with principle continues even after the end of the professional relationshipNeed to comply with principle continues even after the end of the professional relationship

Fundamental Principles (cont’d) Professional behavior –Obligation to comply with relevant laws and regulations and avoid any action that discredits the profession Should not make exaggerated claims for services they are able to offer, qualifications they possess or experience they have gainedShould not make exaggerated claims for services they are able to offer, qualifications they possess or experience they have gained Make disparaging references or unsubstantiated comparison to work of othersMake disparaging references or unsubstantiated comparison to work of others

Framework – Threats and safeguards

Threats Self-interestSelf-interest Self-reviewSelf-review AdvocacyAdvocacy FamiliarityFamiliarity IntimidationIntimidation

Safeguards Professional, legislative or regulatoryProfessional, legislative or regulatory Within the work environmentWithin the work environment

Part B – Professional Accountants in Public Practice Professional appointmentProfessional appointment –Client acceptance –Engagement acceptance –Changes in appointment Conflicts of interestConflicts of interest Second opinionsSecond opinions Fees and other types of remunerationFees and other types of remuneration –Contingent fees –Referral fees

Part B – Professional Accountants in Public Practice Marketing professional servicesMarketing professional services Gifts and hospitalityGifts and hospitality Custody of client assetsCustody of client assets Objectivity – all servicesObjectivity – all services Independence – assurance engagementsIndependence – assurance engagements –Financial Interests –Family and personal relationships –Long association of personnel –Non-audit services

Part C – Professional Accountants in Business Potential conflictsPotential conflicts Preparation and reporting of informationPreparation and reporting of information –Prepared in accordance with relevant standards –Should not be associated with misleading information Acting with sufficient expertiseActing with sufficient expertise Financial interestsFinancial interests InducementsInducements

Code of Ethics