Go, Sarah Jane B.

Nov. 17, 2014

BSA-3

MW12:00-3:00

Code of Ethics for Professional Accountants in the Philippines

FUNDAMENTAL PRINCIPLES
a) Integrity:straightforwardandhonestinallprofessionalandbusinessrelationships
Italsoreferstopersonalqualitiesandattributesthatareconsideredessentialfortheauditor.
These include probity, transparency, and correct interpretation of facts, ability to make fair
decisions,andabilitytoexercisereasonableskill,careandcaution.
b) Objectivity:notallowbias,conflictofinterestorundueinfluenceofotherstooverrideprofessional
orbusinessjudgments
Objectivityreferstothecarefuluseofprotractedproceduresandtesttoarrivetoa conclusion
suchthatasimilarindependenttestbyanotherpersonwouldgivethesameconclusion.
c) Professionalcompetenceandduecare:continuingdutytomaintainprofessionalknowledgeandskill
atthelevelrequiredtoensurethataclientoremployerreceivescompetentprofessionalservice
basedoncurrentdevelopmentsinpractice,legislationandtechniques
To maintain professional knowledge and skill at the level required to ensure that clients or
employersreceivecompetentprofessionalservicesand
To act diligently in accordance with applicable technical and professional standards when
offeringservices.
Professionalcompetencemaybedividedinto2phases:
1. Attainmentofprofessionalcompetence:
Highstandardofgeneraleducation.
Relevantandadequateworkingexperience.
2. Maintenanceofprofessionalcompetence:
Continuingawarenessofthedevelopmentsintheprofessionbyattending
ContinuingProfessionalEducationprogram(CPE)
d) Confidentiality: respecttheconfidentialityofinformationacquiredasaresultofprofessionaland
businessrelationshipsandshouldnotdiscloseanysuchinformationtothirdpartieswithoutproper
andspecificauthorityunlessthereisalegalorprofessionalrightordutytodisclose
Factorstoconsiderwhendisclosingconfidentialinformation
1) Whethertheinterestsofallparties,including3rdpartieswhoseinterestmaybeaffected,could
beharmediftheclientoremployerconsentstothedisclosureofinformationbythe
professionalaccountants
2) Thetypeofcommunicationthatisexpectedandtowhomitisaddressed;inparticular,
professionalaccountantsshouldbesatisfiedthatthepartiestowhomthecommunicationis
addressedareappropriaterecipients.
3) Whetheralltherelevantinformationisknownandsubstantiated,totheextentit
ispracticable;whenthesituationinvolvesunsubstantiatedfacts,incompleteinformationor
unsubstantiatedconclusions,professionalJudgmentshouldbeusedindeterminingthetypeof
disclosurestobemadeifany
e) Professionalbehavior:complywithrelevantlawsandregulationsandshouldavoidanyactionthat
discreditstheprofession
CONCEPTUAL FRAMEWORK APPROACH
Thecircumstancesinwhichprofessionalaccountantsoperatemaygiverisetospecificthreatsto
compliancewiththefundamentalprinciples.Ifidentifiedthreatsareotherthanclearlyinsignificant,a
professionalaccountantshould,whereappropriate,applysafeguardstoeliminatethethreatsorreduce
them to an acceptable level, such that compliance with the fundamental principles is not
compromised.
Aprofessionalaccountantshouldtakequalitativeaswellasquantitativefactorsintoaccountwhen
consideringthesignificanceofathreat.Ifaprofessionalaccountantcannotimplementappropriate
safeguards,theprofessionalaccountantshoulddeclineordiscontinuethespecificprofessionalservice
involved,orwherenecessaryresignfromtheclientortheemployingorganization
THREATSANDSAFEGUARDS
CategoriesofThreats
a) Selfinterestthreats,whichmayoccurasaresultofthefinancialorotherinterestsofprofessional
accountantorofanimmediateorclosefamilymember;

b) Selfreviewthreats,whichmayoccurwhenapreviousjudgmentneedstobereevaluatedbythe
professionalaccountantresponsibleforthatjudgment;
c) Advocacy threats, which may occur when a professional accountant promotes a position or
opiniontothepointthatsubsequentobjectivitymaybecompromised;
d) Familiarity threats, which may occur when, because of a close relationship, a professional
accountantbecomestoosympathetictotheinterestsofothers;and
e) Intimidationthreats,whichmayoccurwhenaprofessionalaccountantmaybe deterredfrom
actingobjectivelybythreats,actualorperceived.
CategoriesofSafeguards
a) Safeguardscreatedbytheprofession,legislationorregulation;
o
Educational,trainingandexperiencerequirementsforentryintotheprofession.
o
Continuingprofessionaldevelopmentrequirements.
o
Corporategovernanceregulations.
o
Professionalstandards.
o
Professionalorregulatorymonitoringanddisciplinaryprocedures.
o
Externalreviewbyalegallyempoweredthirdpartyofthereports,returns,communications
orinformationproducedbyaprofessionalaccountant.
b) Safeguardsintheworkenvironment
ETHICALCONFLICTRESOLUTION
Wheninitiatingeitheraformalorinformalconflictresolutionprocess,aprofessionalaccountantshould
considerthefollowing,eitherindividuallyortogetherwithothers,aspartoftheresolutionprocess:
a) Relevantfacts;
b) Ethicalissuesinvolved;
c) Fundamentalprinciplesrelatedtothematterinquestion;
d) Establishedinternalprocedures;and
e) Alternativecoursesofaction.
Whereamatterinvolvesaconflictwith,orwithin,anorganization,aprofessionalaccountantshould
alsoconsiderconsultingwiththosechargedwithgovernanceoftheorganization,suchastheboardof
directorsortheauditcommittee.
Itmaybeinthebestinterestsoftheprofessionalaccountanttodocumentthesubstanceoftheissue
anddetailsofanydiscussionsheldordecisionstaken,concerningthatissue.
Ifasignificantconflictcannotberesolved,aprofessionalaccountantmaywishtoobtainprofessional
advicefromtherelevantprofessionalbodyorlegaladvisors,andtherebyobtainguidanceonethical
issueswithoutbreachingconfidentiality.
If,afterexhaustingallrelevantpossibilities,theethicalconflictremainsunresolved,aprofessional
accountantshould,wherepossible,refusetoremainassociatedwiththemattercreatingtheconflict.
PROFESSIONALAPPOINTMENT
Aprofessionalaccountantinpublicpracticewhoisaskedtoreplaceanotherprofessionalaccountant
in public practice, or who is consideringtendering for an engagement currently held by another
professional accountant in public practice, should determine whether there are any reasons,
professional or other, for not accepting the engagement, such as circumstances that threaten
compliancewiththefundamentalprinciples.
Thesignificanceofthethreatsshouldbeevaluated.
Anexistingaccountantisboundbyconfidentiality.Theextenttowhichtheprofessionalaccountant
inpublicpracticecanandshoulddiscusstheaffairsofaclientwithaproposedaccountantwill
dependonthenatureoftheengagementandon:
1 (a)Whethertheclientspermissiontodosohasbeenobtained;or
2 (b) The legal or ethical requirements relating to such communications and disclosure,
whichmayvarybyjurisdiction.
Intheabsenceofspecificinstructionsbytheclient,anexistingaccountantshouldnotordinarily
volunteerinformationabouttheclientsaffairs.
Ifidentifiedthreatsareotherthanclearlyinsignificant,safeguardsshouldbeconsideredandapplied
asnecessarytoeliminatethemorreducethemtoanacceptablelevel.
CONFLICTSOFINTEREST
Aprofessionalaccountantinpublicpracticeshouldtakereasonablestepstoidentifycircumstances
thatcouldposeaconflictofinterest.

 A professional accountant in public practice should evaluate the significance of any threats.
Evaluation includes considering, before accepting or continuing a client relationship or specific
engagement,whethertheprofessionalaccountantinpublicpracticehasanybusinessinterests,or
relationshipswiththeclientorathirdpartythatcouldgiverisetothreats.
Thefollowingadditionalsafeguardsshouldalsobeconsidered:
a) Theuseofseparateengagementteams;and
b) Procedures to prevent access to information (e.g., strict physical separation of such teams,
confidentialandsecuredatafiling);and
c) Clearguidelinesformembersoftheengagementteamonissuesofsecurityandconfidentiality;
d) Theuseofconfidentialityagreementssignedbyemployeesandpartnersofthefirm;and
e) Regularreviewoftheapplicationofsafeguardsbyaseniorindividualnotinvolvedwithrelevant
clientengagements.
SECONDOPINIONS
Situationswhereaprofessionalaccountantinpublicpracticeisaskedtoprovideasecondopinionon
the application of accounting, auditing, reporting or other standards or principles to specific
circumstancesortransactionsbyoronbehalfofacompanyoranentitythatisnotanexistingclient
maygiverisetothreatstocompliancewiththefundamentalprinciples.
FEESANDOTHERTYPESOFREMUNERATION
Whenenteringintonegotiations regardingprofessional services, a professional accountant in
publicpracticemayquotewhateverfeedeemedtobeappropriate.
Feeschargedforassuranceengagementsshouldbeafairreflectionofthevalueoftheworkinvolvedand
shouldtakeintoaccount,amongothers:
(a)Theskillandknowledgerequiredforthetypeofworkinvolved;
(b)Theleveloftrainingandexperienceofthepersonsnecessarilyengagedonthework;
(c)Thetimenecessarilyoccupiedbyeachpersonengagedonthework;and
(d)Thedegreeofresponsibilityandurgencythattheworkentails.
Contingentfees arewidelyusedforcertaintypesofnonassuranceengagements.Theymay,however,
give rise to threats to compliance with the fundamental principles in certain circumstances. The
significance of such threats should be evaluated and, if they are other than clearly insignificant,
safeguardsshouldbeconsideredandappliedasnecessarytoeliminateorreducethemtoanacceptable
level.Suchsafeguardsmayinclude:
a) Anadvancewrittenagreementwiththeclientastothebasisofremuneration.
b) Disclosuretointendedusersoftheworkperformedbytheprofessionalaccountantinpublic
practiceandthebasisofremuneration.
c) Qualitycontrolpoliciesandprocedures.
d) Reviewbyanobjectivethirdpartyoftheworkperformedbytheprofessionalaccountantin
publicpractice.
Incertaincircumstances,aprofessionalaccountantinpublicpracticemayreceivea referralfeeor
commissionrelatingtoaclient.
Aprofessionalaccountantinpublicpracticemayalsopayareferralfeetoobtainaclient,forexample,
wheretheclientcontinuesasaclientofanotherprofessionalaccountantinpublicpracticebutrequires
specialistservicesnotofferedbytheexistingaccountant.
Aprofessionalaccountantinpublicpracticeshouldnotpayorreceiveareferralfeeorcommission,
unlesstheprofessionalaccountantinpublicpracticehasestablishedsafeguardstoeliminatethethreats
orreducethemtoanacceptablelevel.Suchsafeguardsmayinclude:
a) Disclosingtotheclientanyarrangementstopayareferralfeetoanotherprofessionalaccountant
fortheworkreferred.
b) Disclosingtotheclient any arrangements to receive a referral fee for referringthe client to
anotherprofessionalaccountantinpublicpractice.
c) Obtainingadvanceagreementfromtheclientforcommissionarrangementsinconnectionwith
thesalebyathirdpartyofgoodsorservicestotheclient.
MARKETINGPROFESSIONALSERVICES

Whenaprofessionalaccountantinpublicpracticesolicitsnewworkthroughadvertising orother
formsofmarketing,theremaybepotentialthreatstocompliancewiththefundamentalprinciples.
Aprofessionalaccountantinpublicpracticeshouldnotbringtheprofessionintodisreputewhen

marketingprofessionalservices.Theprofessionalaccountantinpublicpracticeshouldbehonest
andtruthfulandshouldnot:
a) Makeexaggeratedclaimsforservicesoffered,qualificationspossessedorexperiencegained;
b) Makedisparagingreferencestounsubstantiatedcomparisonstotheworkofanother.Ifthe
professionalaccountantinpublicpracticeisindoubtwhetheraproposedformofadvertising
ormarketingisappropriate,theprofessionalaccountantinpublicpracticeshouldconsultwith
therelevantprofessionalbody.
GIFTSANDHOSPITALITY
Aprofessionalaccountantinpublicpractice,oranimmediateorclosefamilymember,maybeoffered
giftsandhospitalityfromaclient.Suchanofferordinarilygivesrisetothreatstocompliancewiththe
fundamentalprinciples.Forexample,selfinterestthreatstoobjectivitymaybecreatedifagiftfroma
clientisaccepted;intimidationthreatstoobjectivitymayresultfromthepossibilityofsuchoffers
beingmadepublic.
CUSTODYOFCLIENTASSETS
Aprofessionalaccountantinpublicpracticeshouldnotassumecustodyofclientmoniesorother
assetsunlesspermittedtodosobylawand,ifso,incompliancewithanyadditionallegalduties
imposedonaprofessionalaccountantinpublicpracticeholdingsuchassets.
Theholdingofclientassetscreatesthreatstocompliancewiththefundamentalprinciples;for
example,thereisaselfinterestthreattoprofessionalbehaviorandmaybeaselfinterestthreatto
objectivityarisingfromholdingclientassets.Tosafeguardagainstsuchthreats,aprofessional
accountantinpublicpracticeentrustedwithmoney(orotherAssets)belongingtoothersshould:
a) Keepsuchassetsseparatelyfrompersonalorfirmassets;and
b) Usesuchassetsonlyforthepurposeforwhichtheyareintended;and
c) Atalltimes,bereadytoaccountforthoseassets,andanyincome,dividendsorgaingenerated,to
anypersonsentitledtosuchaccounting;and
OBJECTIVITYALLSERVICES
Aprofessionalaccountantinpublicpracticeshouldconsiderwhenprovidinganyprofessional
servicewhethertherearethreatstocompliancewiththefundamentalprincipleofobjectivity
resultingfromhavinginterestsin,orrelationshipswith,aclientordirectors,officersoremployees.
Forexample,afamiliaritythreattoobjectivitymaybecreatedfromafamilyorclosepersonalor
businessrelationship.
Aprofessionalaccountantinpublicpracticewhoprovidesanassuranceserviceisrequiredtobe
independentoftheassuranceclient.Independenceofmindandinappearanceisnecessarytoenable
theprofessionalaccountantinpublicpracticetoexpressaconclusion,andbeseentoexpressa
conclusion,withoutbias,conflictofinterestorundueinfluenceofothers.Section290provides
specificguidanceonindependencerequirementsforprofessionalaccountantsinpublicpractice
whenperforminganassuranceengagement.
Theexistenceofthreatstoobjectivitywhenprovidinganyprofessionalservicewilldependupon
theparticularcircumstancesoftheengagementandthenatureoftheworkthattheprofessional
accountantinpublicpracticeisperforming.
Aprofessionalaccountantinpublicpracticeshouldevaluatethesignificanceofidentifiedthreats
and,iftheyareotherthanclearlyinsignificant,safeguardsshouldbeconsideredandappliedas
necessarytoeliminatethemorreducethemtoanacceptablelevel.Suchsafeguardsmayinclude:
a)
Withdrawingfromtheengagementteam.
b)
Supervisoryprocedures.
c)
Terminatingthefinancialorbusinessrelationshipgivingrisetothethreat.
d)
Discussingtheissuewithhigherlevelsofmanagementwithinthefirm.
e)
Discussingtheissuewiththosechargedwithgovernanceoftheclient.