Haroon Tabraze, FCA Code of Ethics Structure of

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Haroon Tabraze, FCA Code of Ethics Structure of the CODE PART 1 Complying with the Code, Fundamental Principles, Conceptual framework Part 2 Chartered Accountant in Business Part 3 Chartered Accountant in Practice International Independence

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Haroon Tabraze, FCA Code of Ethics

Structure of the CODE PART 1
Complying with the Code, Fundamental Principles, Conceptual framework Part 2
Chartered Accountant in Business Part 3
Chartered Accountant in Practice International Independence Standard
Independence for Audit & Review
Independence for Assurance engagements Glossary

Complying with the Code Letter R denotes requirement
Letter A provides context, explanations, suggestions
R. A CA shall comply with the Code. Where laws or regulations preclude compliance, the laws and regulations prevail.
R. A CA shall evaluate significance to any breach of Code that is identified, and:
Take action to address the breach satisfactorily
Determine whether to report the breach to relevant parties (professional or regulatory bodies, or oversight bodies).

Fundamental principles R. A chartered accountant shall comply with each of the fundamental principles of ethics
Fundamental principles establish the standard of behavior expected from the CA.
Where CA face conflict in applying a fundamental principle with one or more other fundamental principles the CA may:
Consult within the firm
Those charged with governance
A professional body
A regulatory body
Legal Counsel

Integrity Integrity - to be straightforward and honest in all professional and business relationships. Integrity also implies fair dealing and truthfulness.

A CA shall not knowingly be associated with:
Materially false or misleading information
Information furnished recklessly (willfully dangerous)
Omits or obscures information to make it misleading
Exception: when a modified opinion is given for such info.

Integrity Objectivity Objectivity - to not allow bias, conflict of interest or undue influence of others to override professional or business judgments.
Conflict of Interest is:
CA undertaking professional activity for more than one party whose interest conflict with each other
Interest of CA and client have a conflict with each other

Integrity Objectivity Professional Competence Professional Competence and Due Care - to maintain professional knowledge and skill at the required level.
Competence requires (a) Attainment; and (b) Maintenance of professional competence.
To act diligently in accordance with applicable technical and professional standards.
Diligence means to be careful, thorough and timely.
Ensure staff has appropriate training and supervision.

Integrity Objectivity Professional Competence Confidentiality Confidentiality - to respect the confidentiality of information acquired as a result of professional and business relationships and, therefore, not disclose any such information to third parties without proper and specific authority, unless there is a legal or professional right or duty to disclose.
Disclosure is required by law when:
Documents are required in the course of legal proceedings; or
There is a professional duty or right to disclose, when not prohibited by law, to comply with the QCR program of the Institute

Integrity Objectivity Professional Competence Confidentiality Professional Behavior Professional Behavior - to comply with relevant laws and regulations and avoid any action that discredits the profession.
A CA shall not engage in any business, occupation or activity that might impair the integrity, objectivity or reputation of the profession.

The Conceptual framework Conceptual framework specifies an approach for a CA to:
Identify threats to compliance with fundamental principles
Evaluate the threats identified
Address the threats by eliminating or reducing them to an acceptable level
R. When dealing with ethical issue, the CA shall consider the context in which the issue has arisen.

Exercising professional Judgment Understand the known facts and circumstances and consider:
Potentially relevant information may be missing
Facts are inconsistent with each other
CA has sufficient expertise and experience to reach conclusion
CA’s own preconception or biases may be affecting the judgment
There may be more than one conclusions that could be reached by using the same information

Third Party Test The CA should reach the same conclusion that a reasonable third party would likely to reach by using the same information.
The third party may not be an accountant, but knowledgeable and experienced.

Threats to compliance R. The CA shall identify threats to compliance with the fundamental principles
Threats may be created by a broad range of facts and circumstances.
It is not possible to define every situation that creates threats
A threat is at acceptable level when CA using third party test concludes that CA complies with fundamental principle
Threats may have quantitative or qualitative or both factors.

Integrity Objectivity Competence Confidentiality Behavior Threats to Compliance with Fundamental Principles Self-interest threat - the threat that a financial or other interest will inappropriately influence the chartered accountant's judgment or behavior Self Interest

Integrity Objectivity Competence Confidentiality Behavior Threats to Compliance with Fundamental Principles Self-review threat - the threat that a chartered accountant will not appropriately evaluate the results of a previous judgment made or activity or service performed by the chartered accountant, or by another individual within the chartered accountant's firm or employing organization, on which the accountant will rely when forming a judgment as part of providing a current service; Interest Self Review

Integrity Objectivity Competence Confidentiality Behavior Threats to Compliance with Fundamental Principles Advocacy threat - the threat that a chartered accountant will promote a client's or employer's position to the point that the objectivity is compromised; Interest Self Review Advocacy

Integrity Objectivity Competence Confidentiality Behavior Threats to Compliance with Fundamental Principles Familiarity threat - the threat that due to a long or close relationship with a client or employer, a chartered accountant will be too sympathetic to their interests or too accepting of their work; and Interest Self Review Advocacy Familiarity

Integrity Objectivity Competence Confidentiality Behavior Threats to Compliance with Fundamental Principles Intimidation threat - the threat that a chartered accountant will be deterred from acting objectively because of actual or perceived pressures, including attempts to exercise undue influence over the chartered accountant. Interest Self Review Advocacy Familiarity Intimidation

A Chartered Accountant shall:
(a) Identify threats to compliance with the fundamental principles;
(b) Evaluate the significance of the threats identified; and
(c) Apply safeguards, when necessary, to eliminate the threats or reduce them to an acceptable level.
Safeguards are necessary when the chartered accountant determines that the threats are not at a level at which a reasonable and informed third party would be likely to conclude, weighing all the specific facts and circumstances that compliance with the fundamental principles is not compromised.

Integrity Objectivity Competence Confidentiality Behavior Threats to Compliance with Fundamental Principles Safeguards are actions or other measures that may eliminate threats or reduce them to an acceptable level. They fall into two broad categories:
a) Safeguards created by the profession, legislation or regulation; and
b) Safeguards in the work environment. Interest Self Review Advocacy Familiarity Intimidation

Integrity Objectivity Competence Confidentiality Behavior Threats to Compliance with Fundamental Principles Interest Self Review Advocacy Familiarity Intimidation Apply Safeguards Threats are eliminated / reduced to acceptable level If threats are not reduced
Resign / Decline

A chartered accountant may encounter situations in which threats cannot be eliminated or reduced to an acceptable level, either because the threat is too significant or because appropriate safeguards are not available or cannot be applied. In such situations, the chartered accountant shall decline or discontinue the specific professional activity or service involved or resigns from the engagement (or employment).

Integrity Objectivity Competence Confidentiality Behavior Threats to Compliance with Fundamental Principles CA in Practice Self Interest Threat Direct Financial Interest fee from one client Close business relationship Possibility of losing client Employment negotiation Contingent fee Discovering an error in previous accounts

Integrity Objectivity Competence Confidentiality Behavior Threats to Compliance with Fundamental Principles CA in Practice Interest Self Review Reviewing after designing Prepared data Previous director or officer of client Performed service affecting subject matter

Integrity Objectivity Competence Confidentiality Behavior Threats to Compliance with Fundamental Principles CA in Practice Interest Self Review Advocacy Promoting client’s shares Acting as advocate

Integrity Objectivity Competence Confidentiality Behavior Threats to Compliance with Fundamental Principles CA in Practice Interest Self Review Advocacy Familiarity Family member Director served as engagement partner Accepting gifts Long association

Integrity Objectivity Competence Confidentiality Behavior Threats to Compliance with Fundamental Principles CA in Practice Interest Self Review Advocacy Familiarity Intimidation Possible litigation Reduction of work (fee) Employee more competent to make judgments Partner forcing team members

Revisions to Part-2 CA in Business Section 250. Inducements including gifts and hospitality
R. CA shall obtain understanding of laws (bribery or corruption) that may prohibit gifts
R. CA shall not offer, or encourage others to offer a inducement that may be concluded improper in third party test
R. CA shall not accept, or encourage others to accepts a inducement that may be concluded improper in third party test
R. CA shall be alert to inducements offered to or made by an immediate or close family member

Revisions to Part-2 CA in Business Section 260. Responding to NOCLAR
R. CA shall obtain understanding of laws relating to NOCLAR that may be different to provisions of the Code
R. A (senior) CA shall discuss the matter with CA’s supervisor when there is suspicion of NOCLAR
R. CA shall:
Communicate with those charged with governance
Comply with applicable laws and regulations
Rectify the non-compliance and reduce risk of reoccurance

Revisions to Part-2 CA in Business Section 270. Pressure to breach the fundamental principles
R. CA shall not allow pressure from others to breach the compliance with fundamental principles. Pressures may be:
from family member to act as vendor
To report misleading F/S to meet investor expectations
From elected officials on Public Sector accountants
From superiors to approve expenses
From superiors to perform a task without having skills
Pressure to structure a transaction to evade taxes

Revisions to Part-2 CA in Business Other occupations in which CA’s can engage without Council Permission – dropped from the new code
R. CA shall not allow pressure from others to breach the compliance with fundamental principles. Pressures may be:
from family member to act as vendor
To report misleading F/S to meet investor expectations
From elected officials on Public Sector accountants
From superiors to approve expenses
From superiors to perform a task without having skills
Pressure to structure a transaction to evade taxes

Revisions to Part-3 CA in Practice Section 330.3 (A2 to A4) Fee and other types of remuneration – dropped from the new code
Replaced with provisions that consider lower fee charged as compared to the previous auditor could be considered as “undercutting”.
Section 330.4 (A1 to A4) relating to contingent fee – dropped from the new code
Section 370 Public Notices, Announcements and communication
Undue publicity to be avoided
Advertising for solicitation is to be avoided

Revisions to Part- 4 Independence standards Cooling off requirements key audit partners for PIE
Cooling off requirement is:
For engagement partner – 5 years
For engagement quality control reviewer – 3 years
For other Key Audit Partner – 2 years

ASEC recommended to adopt this requirement from periods beginning on or after 1st January 2022

Revisions to Part- 4 Independence standards Performance of accounting and bookkeeping services in emergency situations has been recommended to retain, as the prohibition has been removed from COCG Regulations 2017.

Conflict of interest
The chartered accountant undertakes a professional activity related to a particular matter for two or more parties whose interests with respect to that matter are in conflict; or
The interests of the chartered accountant with respect to a particular matter and the interests of a party for whom the chartered accountant undertakes a professional activity related to that matter are in conflict.

Conflict Resolution
a) Gather Relevant facts;
b) Identify Ethical issues involved;
c) Identify Fundamental principles related to the matter in question;
d) What are the Established internal procedures (norms or practices); and
e) What are the Alternative courses of action.
Having considered the relevant factors, a chartered accountant shall determine the appropriate course of action, weighing all possible course of action.

Conflict Resolution (…. Continued)
A chartered accountant shall determine whether to consult with those charged with governance of the organization, such as the board of directors or the audit committee.
It may be in the best interests of the chartered accountant to document the substance of the issue, the details of any discussions held, and the decisions made.
If a significant conflict cannot be resolved, a chartered accountant may consider obtaining professional advice from the relevant professional body or from legal advisors.

Conflict Resolution (…. Continued 2…)
If, after exhausting all relevant possibilities, the ethical conflict remains unresolved, a chartered accountant shall, where possible, refuse to remain associated with the matter creating the conflict. The chartered accountant shall determine whether, in the circumstances, it is appropriate to withdraw from the engagement team or specific assignment, or to resign altogether from the engagement, the firm or the employing organization.

Thank you

Haroon Tabraze, FCA Code of Ethics Structure of

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