CODE OF ETHICS
- set of concepts and principles that guide us in determining what behavior
helps or harms an individual and/or society
- applied when an individual has to decide from various alternatives
regarding moral principles
Why is there a need for a Code of Ethics?
 Increase the confidence of the public to quality of professional
services being offered by accountants
 To work to the highest standards of professionalism
 To attain highest levels of performance
 To meet the public interest requirement
FUNDAMENTAL PRINCIPLES OF ETHICS – “COBID”

CONFIDENTIALITY
- respect the confidentiality on information acquired because of
professional/business relationship
- information will NOT be disclosed to a third party

OBJECTIVITY
- exercise professional/business judgement without being compromised by
bias, conflict of interest, or undue influence of, or undue reliance on,
individuals, organizations, technology, or other factors
- shall NOT undertake a professional activity if a circumstance or
relationship unduly influences the accountant’s professional judgement
regarding that activity

PROFESSIONAL BEHAVIOR
- comply with relevant laws and regulations
- avoid any conduct that the professional accountant knows or should
know might discredit the profession
- NOT knowingly engage in any endeavor that impairs or might impair the
integrity, objectivity, or good reputation of the profession

INTEGRITY
- straightforward and honest in all professional and business relationships
- fair dealing, truthfulness and having the strength of character to act
appropriately

PROFESSIONAL COMPETENCE AND DUE CARE
- attain and maintain knowledge and skill at the level required to ensure
that a client receives competent professional service
- continuing awareness and an understanding of relevant technical,
professional, business and technology-related developments
IDENTIFY
1) SELF-INTEREST –
financial/other interest
2) SELF-REVIEW –
previous judgement
3) ADVOCACY – promote
a client’s or employing
organization’s position
4) FAMILIARITY – long or
close relationship
5) INTIMIDATION –
actual or perceived
pressures
EVALUATE
ACCEPTABLE LEVEL
- a level at which a thirdparty test would likely
conclude that the
accountant complies
with the fundamental
principles
ADDRESS
1) Eliminating the
circumstances that are
creating the threats
2) Applying safeguards to
reduce the threats to an
acceptable level
3) Declining/Ending the
specific professional
activity
BIAS - affects the exercise of professional judgement
1) ANCHORING BIAS – use an initial piece of information as an anchor against
which subsequent information is inadequately assessed
2) AUTOMATION BIAS – favor output generated from automated systems,
even when human reasoning or contradictory information raises questions
as to whether such output is reliable or fit for purpose
3) AVAILABILITY BIAS – place more weight on events or experiences that
immediately come to mind or are readily available
4) CONFIRMATION BIAS – place more weight on information that
corroborates an existing belief than information that contradicts or casts
doubt on that belief
5) GROUPTHINK – discourage individual creativity and responsibility and as a
result reach a decision without critical reasoning or consideration of
alternatives
6) OVERCONFIDENCE BIAS – overestimate one’s own ability to make accurate
assessments of risk or other judgements or decisions
7) REPRESENTATION BIAS – base an understanding on a pattern of
experiences, events or beliefs that is assumed to be representative
8) SELECTIVE PERCEPTION – person’s expectations to influence how the
person views a particular matter or person
ADDITIONAL CONSIDERATIONS FOR ASSURANCE ENGAGEMENTS
1) Firm Culture
2) Independence
3) Professional Skepticism
- an attitude that includes a questioning mind
- being alert to conditions which may indicate possible misstatement due
to error/fraud
- critical assessment of audit evidence
PROFESSIONAL ACCOUNTANTS IN BUSINESS (PAIB)
CIRCUMSTANCE
Conflict of interest
Preparation/presentation of
information
Acting without sufficient
expertise
Financial interests,
compensation, and incentives
Inducements, including gifts
and hospitality
Responding to noncompliance with laws and
regulations
Pressure to breach the
fundamental principles
THREATS CREATED
Self-interest
Self-interest
Intimidation
FUNDAMENTAL PRINCIPLES
AFFECTED
Objectivity
ALL
Self-interest
Familiarity
Intimidation
Professional Competence
and Due Care
Objectivity
Confidentiality
Integrity
Objectivity
Professional Behavior
Self-interest
Intimidation
Integrity
Professional Behavior
Intimidation
ALL
Self-interest
Self-interest
Communicating with Those Charged with Governance
 Nature and importance of the circumstances
 Matter to be communicated
If a PAIB communicates with individuals who have both management and
governance responsibilities, the PAIB shall be satisfied that communication with
those individuals adequately informs all of those in government role.
THREATS. PAIB’s evaluation of the level of threat is greatly influenced by the
work environment within the employing organization and its operating
environment.
 Leadership
 Policies and Procedures
 Systems of Corporate Oversight
 Strong Internal Controls
 Recruitment Procedures
 Timely Communication of Policies and Procedures
 Ethics and Code of Conduct Policies
PROFESSIONAL ACCOUNTANTS IN PUBLIC PRACTICE (PAPP)
CIRCUMSTANCE
THREATS CREATED
Conflict of interest
Professional Appointments
Self-interest
ALL
Second Opinions
Self-interest
Fees and Other Types of
Remuneration
Self-interest
Inducements, including gifts
and hospitality
Self-interest
Familiarity
Intimidation
Custody of Client Assets
Self-interest
Responding to noncompliance with laws and
regulations
Self-interest
Intimidation
FUNDAMENTAL PRINCIPLES
AFFECTED
Objectivity
ALL
Professional Competence
and Due Care
Professional Competence
and Due Care
Objectivity
Integrity
Objectivity
Professional Behavior
Objectivity
Professional Behavior
Integrity
Professional Behavior
Communicating with Those Charged with Governance
 Nature and importance of the circumstances
 Matter to be communicated
THREATS. PAPP’s evaluation of threat is greatly influenced by the
conditions, policies and procedures relating to the following:
 Client and its Operating Environment
 Firm and its Operating Environment