Ethics
Introduction : In general terms, ethics is a set of moral principles and
standards of correct behaviour. They are essential for any society to
operate and function effectively. They help to differentiate between
right and wrong. Ethical principles can be incorporated into law, in
many cases their application has to depend on the self-discipline of the
individual. This principle can be seen to apply to society as a whole,
the business community and the accounting profession.
Fundamental principles : Professional accountants are expected to
follow the guidance contained in the fundamental principles in the
IESBA Code in all of their professional and business activities. The Code
sets out five fundamental principles :
1. Integrity : A professional accountant should be straightforward
and honest in all professional and business relationships.
2. Objectivity : A professional accountant should not allow bias,
conflict of interest or undue influence of others to override
professional or business judgements.
3. Professional competence and due care : A professional
accountant has an obligation to Maintain professional knowledge
and skill at the level required to ensure that a client/employer
receives competent professional services based upon current
developments in practice, legislation and techniques.
4. Confidentiality : A professional accountant should Not disclose
any such information to third parties without proper and specific
authority.
5. Professional behaviour : A professional accountant should
comply with relevant laws and regulations and should avoid any
action that discredits the profession.
Threats : Compliance with these fundamental principles may
potentially be threatened. Many of these threats can be categorised as
follows:
1. Self-interest threat: The threat that a financial or other interest
of a professional accountant or of an immediate or close family
member will inappropriately influence the professional
accountant's judgment or behaviour.
Examples of circumstances that may create such threats include:
• Financial interests, loans or guarantees
• Incentive compensation arrangements
• Inappropriate personal use of corporate assets
2. Self-review threat: The threat that a professional accountant
will not appropriately evaluate the results of a previous
judgement made by the professional accountant.
3. Advocacy threat: The threat that a professional accountant will
promote a client's or employer's position to the point that the
professional accountant's objectivity is compromised.
4. Familiarity threat: The threat that due to a long or close
relationship with a client or employer, a professional accountant
will be too sympathetic to their interests or too accepting of their
work.
5. Intimidation threat: The threat that a professional accountant
will be deterred from acting objectively by threats, either actual
or perceived.