1. Chapter10 Professional ethics

2. Corporate code of ethics
An ethical code contains a series of statements setting out the corporation’s values and explaining its responsibilities towards stakeholders.
Ethical code is important, but merely issuing a code is not enough.
The code may have many problems: inflexibility, clarity and irrelevancy.

3. Purpose of ethic code Establishment of organization’s values
Promotion of stakeholder responsibilities
Control of individual behavior
Promotion of business objectives (strategy)
Conveying values to stakeholders

4. Profession code of ethics
Codes proposed by IFAC and ACCA
Accountancy profession accept that they have the responsibility to act in the public interest
The guidance begins with fundamental principles of ethics
The guidance supplies a conceptual framework
Threats to compliance, and safeguards to eliminate the threats

5. Fundamental principles of professional ethics
Professional competence and due care
Integrity
Professional behavior
Confidentiality
Objectivity

6. Ethical threats & safeguards
Self-interest
Self-review
Advocacy
Familiarity
Intimidation
Ethical safeguards created by the professional, legislation or regulation, and in the firm’s own systems and procedures

7. Independence of professional accountant
Independence is most important for accountants acting as auditors and assurance providers.
Reasons for the importance: reliability of financial information, credibility of financial information, value for money of audit work, threats to professional standards.

8. Self-interest threat Financial interest
Close business, family or personal relationships
Employment with client
Partner on client board
Gifts and hospitality
Loans and guarantees
Overdue and percentage or contingent fees
High percentage of fees and lowballing

9. Self-review threat
An assurance firm provides services other than assurance services to an assurance client.
The rules about public companies and private companies are different.
The jurisdiction in USA is stricter than UK.
Recent service with an assurance client
General services: of financing activities
Accounting records and financial statements

10. Self-review threat Valuation services Taxation services
Internal audit services (Sarbanes-Oxley)
Corporate finance
Other services

11. Other threats to independence
Advocacy threat: the assurance firm is in a position of taking the client’s part in a dispute or acting as their advocate.
Familiarity threat: the audit firm and its staff become over familiar with the client and its staff. This threat is connected with self-interest threat.
Intimidation threat: members of the assurance team have reason to be intimidated by client staff.

12. Conflicts of interest
Conflict of interest could result in the ethical code being breached.
Conflicts of interest between members and clients, and between different clients. Individuals also face their own conflicts of interest.
Many safeguards can be used.

13. Problems facing accountants
Conflicts between professional and employment obligations
Preparation and reporting for information
Acting with sufficient expertise
Financial interests
Inducements
Bribery and corruption in businesses

14. The accountancy profession
Professional accountants have the obligation to comply with relevant laws and regulations, and avoid any action that may bring discredit to the profession.
They face many problems in business, like conflicts of obligations, misleading information, lack of expertise, financial interests and inducements.

15. The accountancy profession
Accountants’ responsibility is not only to satisfy the needs of individual clients or employer, but also to satisfy the public interest (stakeholders).
Public interest is the collective well-being of the community of people and institutions the professional accountant serves, these people and institutions are relying on the work of professional accounts.

16. The usefulness of accountancy
Accountancy provides accounts which can be used to judge the performance of the company or the directors in line with regulations, and can influence the judgement of their users.
Accountancy produces information for individuals or corporations seeking to maximize their personal wealth equally. – liberal economic democracy
There’re many criticism, too.