A.
Overview
This learning material covers the topics, Code of Ethics for Professional Accountants and
the Republic Act 9298.
This is relevant to Accountancy students because when you become professionals, you are
expected to behave ethically in the conduct of your profession. The Code of Ethics for
Professional Accountants and the Republic Act 9298 offer guidelines and help regulate the
accountants and the practice of the profession.
You will be able to achieve the desired learning outcomes by devoting time and effort in
studying this material, listening and participating actively in the online discussion, and
accomplishing the tasks assigned in the Classwork section of the Google Classroom for this
course.
B. Desired Learning Outcomes
After studying this module, you should be able to:
1. Enumerate the fundamental principles of professional ethics for accountants.
2. Describe how fundamental principles can apply to situations and enumerate safeguards
that can be applied.
3. Enumerate the limitations concerning the accountants’ practice of profession.
C. Values Integration
In studying this module, it is hoped that you will be able to develop and manifest the
following UA Core Value/s:
✓ Servant Leadership
✓ Integrity
✓ Excellence
✓ Obedience
✓ Open Communication
Faculty: Trixcel Marie Galura AY 2024-25-2 Page 1 of 7
D. Content/Discussion
* Quality Review services When individuals engage in the practice of accounting, they accept their responsibility not
- audits the auditing Firm
only to their clients or employers but also to the public. engagemen- external
Accountants are trusted advisors particularly in verifying the reliability of information
which users do not have direct control. The professional standards of conduct have been
created and updated from time to time to:
1. maintain the credibility of accountants, and
2. protect the public’s trust in the accounting profession.
Four Parts : Part 1 .
2 . 3 . 4
The Code of Ethics for Professional Accountants is divided into three parts, Parts A, B and C.
Part A establishes the fundamental principles of the code of ethics which the accountants
can use as basis for their actions, Parts B and C provide guidance on how the principles can
apply to situations in the public (Part B) and private sector (Part C) and examples of
safeguards that can be applied.
Part A - Fundamental Principles for Professional Accountants
* Materiality ● Integrity – the quality of having strong moral principles and convictions; being
based the nature
on incorruptible and honorable. Integrity may encompass being honest but it is not
Of the business enough. Professional accountants should also possess the courage to make a stand for
the principles he believes in. doing the right thing even no one is looking
● Objectivity – being fair, maintaining unbiased judgment, avoiding conflicts of interests
or undue influence when making decisions.
timely basis .
Thoroughly process taken by the accountant
● Professional Competence and Due Care – maintaining the required knowledge and
skills expected from professional accountants, being up to date concerning the current
developments, legislation, accounting standards and techniques prevalent in the
Accountancy practice, and rendering services in accordance with the applicable
technical and professional standards.
Two phases of professional competence:
1. Attainment of professional competence – completing a bachelor’s degree, passing
professional examinations and actual experiences.
2. Maintenance of professional competence – attending seminars or training to become
updated with the current developments, legislation, accounting standards and
techniques prevalent in the Accountancy practice, establishing a control or
implementing a program to ensure that services are rendered according to prescribed
technical and professional standards.
XPUs :
the client MNPI
D consent of
law ● Confidentiality - preventing oneself from disclosing sensitive information obtained
required by
.
② legally from the practice of the profession and not using any confidential information to enrich
based on regulation oneself.
8.
even known to the public confidentiality clause still prevails
Faculty: Trixcel Marie Galura AY 2024-25-2 Page 2 of 7
Disclosure of information can only be allowed under the following conditions:
(a) Proper and specific authorization from the client or employer is secured. consent
(b) Legally required by a regulating body (e.g. government) or law.
(c) Presence of professional duty or right to disclose confidential information.
● Professional behavior – this applies when professional accountants act in accordance
with the prevalent laws and regulations and avoids tarnishing the credibility of the
profession.
Conceptual Framework Approach
To help the professional accountants meet the ethical requirements and protect the public’s
D Identify any threat interest, the following are required to be observed:
.
3 Way Test
,
Obtain InFo .
❖ Identify any threat that will prevent the accountant from observing the
2) Evaluate the threats fundamental principles.
3) . Apply safeguards ❖ Evaluate the significance of identified threats.
❖ Apply appropriate safeguards to eliminate the threat or reduce it to an acceptable
* eliminate
* reduce to an acceptable level
level.
* decline
conclusion
Threats to Compliance with the Fundamental Principles
4) Document your ❖ Self-interest – accountants may be placed in positions where personal interests
cloud their judgment or behavior. Examples of situations which may create
Reasonable and self-interest threat include: involvement of money
third party test
a) Ownership of shares of stock of the client or a family member possessing
accountant
-
judgment of the ownership of shares of stock of the client.
somehow similar
↑
1s to b) A loan transaction with the client, its officers, directors or affiliates.
c) Significant fees from the engagement with the client which comprise the
the judgment of the
majority of the earnings of the accountant.
3rd d) Fear of losing the engagement.
party e) Presence of a close business relationship with the client.
f) Prospective employment with the client.
g) Contingent fees included in the compensation package.
fees based on the performance of the accountant
❖ Self-review – the threat that the accountant will not objectively evaluate the results
of his prior work or judgment when forming conclusions about the subject matter
of the engagement. Examples of situations which may create self-review treat
include: From private employed to auditor
a) A member of the engagement team occupies or previously occupied a
position in the client’s board or top management.
b) A member of the engagement team occupies or previously occupied a
position which authorizes him to exercise direct and significant influence
concerning the subject matter of the engagement.
Faculty: Trixcel Marie Galura AY 2024-25-2 Page 3 of 7
c) Performing other services to the client which affects the subject matter of
the engagement.
d) The accountant prepared the data that will be the subject matter of the
engagement.
e) Involvement in the design and implementation of the subject matter of the
engagement.
f) Discovery of a significant error when the accountant’s previous work is
re-evaluated.
❖ Advocacy – the threat that the accountant will excessively promote the client or the
employer’s interest that results to impaired objectivity. Examples of situations
which may create advocacy treat include:
a) Dealing or promoting the client’s shares of stocks or other securities.
-
-
b) Representing the client in an existing litigation with third parties.
he if the accountant is too personally ❖ Familiarity - the threat that the accountant will excessively promote the client or
Familiar
-
close to or with employers, the employer’s interest that results to impaired objectivity. Examples of situations
officers or directors of the client
which may create familiarity treat include: to private
,
From auditor employed
company .
a) A member of the engagement team who has an immediate family member
who is also a director, member of the top management or employee of the
client who can exercise direct and significant influence over the subject
matter of the engagement.
b) A former partner of the firm which now occupies a director, top
management or any position that can exercise direct and significant
influence over the subject matter of the engagement.
c) Long association with the client.
d) Acceptance of material gifts or preferential treatment from a client, its
directors, officers or employees.
❖ Intimidation – is the threat that the accountant in rendering services will be
prevented from exercising objectivity due to actual or perceived pressures from the
client or the attempt of the client to exercise undue influence when the accountant
makes professional judgment. Examples of situations which may create familiarity
treat include:
a) The accountant is threatened with litigation.
b) Threat to losing the engagement over disagreements.
c) Request to reduce fees by reducing the extent of work for the engagement.
Safeguards
Safeguards are available measures used to counter threats. By applying a safeguard, the
threat may be eliminated or reduced to an acceptable level.
Categories of Safeguards
Faculty: Trixcel Marie Galura AY 2024-25-2 Page 4 of 7
PR outside , external
❖ Safeguards created by the profession, legislation or regulation. Examples
include:
a) Required education, training and experience for entry into the profession.
b) Continuing professional education.
c) Corporate governance regulations.
d) Professional or regulatory monitoring and any disciplinary measures in
place for noncompliance.
e) External review of the reports, returns, communications or information
from the accountant by a third party appointed by the regulators.
quality review
❖ Safeguards in the working environment. Examples include:
Firm-wide safeguards FWS
a) The organization leaders’ firm commitment to comply with the
fundamental principles.
b) Creating expectations to every member of the firm that they will act based
on what is best for the public.
c) Implements policies and procedures to ensure the quality of engagements.
d) Keeping records of known threats, the organization’s evaluation of the
2 types of Engagement significance of the threats and safeguards used to eliminate the treats or
reduce it to acceptable levels.
D Assurance
.
- external reports e) For firms offering assurance engagements, a documentation of compliance
Internal reports
8 consultancy -
with independence requirements.
f) Documented internal policies which help the firm comply with the
fundamental principles.
g) Document policies and procedures implemented by the entity to address
the following:
- Identification of interests or relationships between the
engagement teams and the clients.
- Prohibit an individual who is not a member of the engagement
team from exercising undue influence over the outcome of the
engagement.
- Manage the reliance on revenue received from client
engagements.
- Disciplinary actions for noncompliance to policies and
procedures.
- Encourage any member of the organization to communicate
identified threats to the fundamental principles.
h) Communications of policies and procedures implemented by the
organization and conducting training or seminars whenever necessary to
ensure that they are understood by every member of the organization.
i) Using different engagement teams when performing non-assurance
engagements to assurance clients.
Faculty: Trixcel Marie Galura AY 2024-25-2 Page 5 of 7
Engagement specific safeguards ESS
a) Engaging the services of additional professional accountants to check the
work of the engagement team or offer advice when necessary.
b) Consulting an independent party which may be a committee of independent
directors, professional accountant or a regulatory body.
c) Discussing identified ethical issues with the client’s governing body
d) Discussion of professional fees and extent of engagement work with the
client’s governing body
e) Involving another firm to perform or re perform a part of the engagement.
f) Rotating engagement teams particularly the senior members of the team.
Client specific safeguards CSS
Firms can also rely on the client’s built-in policies and procedures to address
threats; however the former is not allowed to solely rely on the latter’s
established safeguards. Examples include:
a) A member of the organization other than the management team appoints or
ratifies the appointment of the firm.
b) The client appoints competent personnel who make managerial decisions.
c) Internal controls are in place to ensure objectivity in the selection of the
firm who will conduct non-assurance engagements.
d) The client has a trusted governing body which provides appropriate
oversight and communications concerning the firm’s services.
If the threats cannot be eliminated or reduced to acceptable levels, the firm should refuse to
accept or continue the engagement.
Since Parts B and C of the Code of Ethics for Professional Accountants are situational
examples, these will not be discussed in this module however a material shall be shared to
you so you can read it in more detail. You can assess the complete copy of the code of ethics
through the following link:
[Link]
The Republic Act No. 9298 also known as the Philippine Accountancy Act of 2004
The Philippine Accountancy Act of 2004 governs the practice of the accountancy
profession.
You are suggested to read the official publication to have a clearer grasp of the following:
a) The role of the Professional Regulatory Board of Accountancy
b) Policies concerning the CPA licensure examination
c) Limitations to the practice of accountancy profession.
You can assess the official publication of the act through the following link:
[Link]
Faculty: Trixcel Marie Galura AY 2024-25-2 Page 6 of 7
E. Assessment of Learning
For the self-regulated assessment of what you had learned from this module, please
accomplish the progress check/activity posted in our Google Classroom and submit it on or
before the due date.
F. References
Biore, C., Gonzales, R., Caparas, J., Burgos, N., & Ballada, W. (2015). Good governance &
social responsibility . DomDane Publishers.
Cabrera, M. B., & Cabrera, G. B. (2019). Corporate governance, business ethics, risk
management and internal control. GIC Enterprises & Co., Inc.
Securities and Exchange Commission. (2016). Code of corporate governance for
publicly-listed companies (MC No. 19, Series of 2016).
[Link]
Congratulations for having completed this module!
See you in the next module!
Faculty: Trixcel Marie Galura AY 2024-25-2 Page 7 of 7
Exercise
I .
B
C Both 1 11
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.
2 and
.
3 C-1 and Il
. C local law
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.
5 A
6 . B
D all
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7
..
8
. A
.
9 D
10. A
II .
D
12 . B
13 .
D
1 . C
15 B Intimidation threat professional behavior
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.