Chapter 5 - Principles Of Professional Ethics Flashcards
What are ethics?
These are the moral principles or standards that govern the conduct of the members of that organisation.
Members of professional bodies are expected to maintain the standards of their organisation. As a part of this they are expected to behave in a professional and ethical manner. Within three published rules of most professional organisations there will be sections covering professional ethics.
Professional ethics and the accounting profession
As a professional body AAT has published the code of professional ethics which has been designed to help its members maintain the high standard of professionalism. The aat code is based on IESBAs code of ethics. IESBA is the independent standard setting board responsible for setting global ethical standards for accountants.
To whom does the aat code apply?
The aat code of professional ethics applies to all student members of AAT.
Members of the accounting profession will decide to set themselves up in practice or they might continue to be employed. The AAT has recognised this and has separated the code into three consecutive parts:
Part A applies to all members
Part B applies to members in practice (works in an accounting practice)
Part C applies specifically to members in business
Fundamental ethical principles
A professional accountant is required to comply to comply with the five fundamental principles.
These fundamental principles can be remembered using the letters PPCIO which stands for popular people chat in offices
Integrity
Integrity is the quality of being honest and having strong moral principles that you refuse to compromise. An accountant should be straightforward and honest in all professional and business relationships. There are three key ethical values to integrity: honesty, transparency and fairness.
Objectivity
A person who is objective is someone who based their opinions and decisions on real facts and is not influenced by personal beliefs or feelings.
Independence goes hand in hand with objectivity. In order to act in a professional and ethical manner the accountant must not be influenced by pressure and must remain independent, therefore protecting their principle of objectivity.
Appearing to be objective
An accountant must ensure that they are seen to be objective. This means that any reasonable person who comes into contact with the accountant must be confident they always behave independently.
Professional competence and due care
Professional competence means professional accountants have a duty to keep themselves up to date with developments in the accounting profession. The way in which they are expected to do this is by completing continuing professional development (CPD) on a regular basis.
Due care means that when carrying out an assignment an accountant must always take the appropriate amount of care to ensure that the quality of the work performed meets the high standards expected of the accounting profession. Accountants must be very careful to ensure that they carry out their work to the required standard and take care when clients are unfamiliar with anything to do with accounting or taxation.
Confidentiality
Information obtained by an accountants professional work should not be disclosed without proper and specific authority or unless there is a legal duty to do so.
Using confidential information - accountants must ensure that they do not use any information that they have access to for their own personal advantage or for the advantage of a third party. Eg colleague, friend or family member
Accountants also must not appear to use information that they have gained for their own personal advantage or a third party.
The ongoing duty of confidentiality
This duty of confidentiality extends to the period after the relationship has ended. This means that any information that the accountant gains in the professional work they carry out for a client remains confidential even after the accountant is no longer employed by the client.
Disclosure of confidential information
These are the circumstances where confidential information can be disclosed. There are three main situations where it is acceptable:
When authorised by the client or employer
When disclosure is required by law
Where there is a professional duty to disclose
A professional duty to disclose
An accountant may have a professional duty to disclose confidential information. These circumstances are summarised below:
To comply with the quality review of an IFAC member body or other relevant professional body’s
To respond to an inquiry by the professional accounting body of an ethical, investigatory or disciplinary nature
To protect the professional interests of the accountant in legal proceedings
To comply with technical standards and ethical requirements
Accountants are advised to seek professional or legal advice before disclosing if they are in any doubt
The decision to disclose
There are three points which must be considered before making a disclosure:
The accountant must decide whether they know all the facts regarding the issue and has enough evidence to back these facts up. If they do not have enough evidence they must use their professional judgment to decide to what extent the confidential information can be disclosed.
The accountant must decide who is the right persons to whom this information should be disclosed and how it should be communicated.
Finally the accountant must consider whether they would face any legal consequences from disclosing confidential information
Data protection
Sometimes when an accountant is dealing with financial accounting information they may be faced with a conflict between their compliance with the fundamental ethical principle of confidentiality and compliance with data protection laws. If there is any uncertainty the accountant should seek advice from an expert before disclosing confidential information.
Professional behaviour
Accountants should adopt professional behaviour to comply with relevant laws and regulations and avoid any action that brings our profession into disrepute.
