Code of Ethics

Flashcards on the Code of Ethics for Professional Accountants in the Philippines.

Code of Ethics for Professional Accountants in the Philippines

Based on the International Code of Ethics for professional accountants developed by the International Federation of Accountants; mandatory for all CPAs and applicable to professional services performed in the Philippines on or after January 1, 2004.

Divisions of the Code of Ethics

Part A applies to all professional accountants unless otherwise specified; Part B applies only to those professional accountants in public practice; Part C applies to employed professional accountants, and may also apply, in appropriate circumstances, to accountants employed in public practice.

Contents of Part A of the Code of Ethics

Conceptual Framework Approach to Compliance, Fundamental Principles, Threats and Safeguards, Ethical Conflict Resolution.

Contents of Part B of the Code of Ethics

Professional Appointment, Conflicts of Interest, Second Opinions, Fees and Other Types of Remuneration, Marketing Professional Services, Gifts and Hospitality, Custody of Clients, Objectivity – All Services, Independence – Audit and Review Engagements, Independence – Other Assurance Engagements.

Contents of Part C of the Code of Ethics

Conflict of Interest, Preparation and Reporting of Information, Acting with Sufficient Expertise, Financial Interest, Inducements.

Fundamental Principles that CPAs should observe

Integrity, Objectivity, Professional competence and due care, Confidentiality, Professional behavior.

Integrity

Implies not merely honesty but fair dealing and truthfulness.

Objectivity

Requires professional accountants to be fair, intellectually honest, and free of conflicts of interest.

Two separate phases of Professional Competence

Attainment of professional competence and maintenance of professional competence.

Attainment of professional competence

Requires initially a high standard of general education followed by specific education, training, and examination in professionally relevant subjects and a period of work experience.

Maintenance of professional competence

Requires a continuing awareness of development in the accountancy profession including relevant national and international pronouncements on accounting, auditing, and other relevant regulations and statutory requirements.

Confidentiality

Professional accountants have an obligation to respect the confidentiality of information about a client’s or employer’s affairs acquired in the course of professional services; this duty continues even after the end of the relationship.

Tax Practice - Accountant Responsibility

The professional accountant should ensure that the client or the employer are aware of the limitations attaching to tax advice and services so that they do not misinterpret an expression of opinion as an assertion of fact.

Accountant's responsibility when learning of a material error or omission

Promptly advise the client or employer of the error or omission and recommend that disclosure be made to the revenue authorities.

Publicity guidelines for professional accountants

Not use means which brings the profession into disrepute; not make exaggerated claims; and not denigrate the work of other accountants.

Independence requirements

Independence of mind and independence in appearance.

Independence of mind

The state of mind that permits the provision of an opinion without being affected by influences that compromise professional judgment.

Independence in appearance

The avoidance of facts and circumstances that are so significant that a reasonable and informed third party would reasonably conclude integrity, objectivity, or professional skepticism had been compromised.

Network firm

An entity under common control, ownership or management with the firm or any entity that a reasonable and informed third party having knowledge of all relevant information would reasonably conclude as being part of the firm nationally or internationally.

Financial Interest

An interest in equity or other security, debenture, loan or other debt instrument of an entity including rights and obligations to acquire such an interest and derivatives directly related to such interest.

Direct financial interest

Owned directly by and under the control of an individual or entity; or beneficially owned through a collective investment vehicle, estate, trust, or other intermediary over which the individual or entity has control.

Indirect financial interest

Beneficially owned through a collective investment vehicle, estate, trust or other intermediary over which the individual or entity has no control.

Self-Interest Threat

The threat that a financial or other interest will inappropriately influence the accountant’s judgement or behavior.

Self-Review Threat

The threat that an accountant will not appropriately evaluate the results of a previous judgement made, or activity or service performed by the accountant.

Advocacy Threat

Occurs when a firm, or a member of the assurance team, promotes, or may be perceived to promote, an assurance client’s position or opinion to the point that objectivity may, or may be perceived to be compromised.

Familiarity Threat

Occurs when, by virtue of a close relationship with an assurance client, its directors, officers or employees, a firm or a member of the assurance team becomes too sympathetic to the client’s interests.

Intimidation Threat

The threat that an accountant will be deterred from acting objectively because of actual or perceived pressures, including attempts to exercise undue influence over the accountant.