AUDITINGETHICSLecture # 2Fundamental PrinciplesIntegritThe principle of integrity imposes an obligation on all professional accountants to bestraig!t"#r$ard and !#nest in pr#"essi#naland business relationships. Integrity also implies"air dealing and trut!"ulness.%&'ecti(itThe principle of objectivity imposes an obligation on all professional accountants not tocompromise theirpr#"essi#nal #r &usiness 'udgmentbecause of&ias) c#n"lict #" interest #rt!e undue in"luence #" #t!ers.Pr#"essi#nal C#mpetence and Due CareTheprincipleofprofessional competenceandduecareimposesthefollowingobligationsonprofessional accountants: To maintain professional knowledge and skill at the level required to ensure that clients oremployers receive competent professional service; and To act diligently in accordance with applicable technical and professional standards whenproviding professional servicesC#n"identialitTheprincipleofconfidentialityimposesanobligationonprofessional accountantstorefrainfrom: Disclosing outside the firm or employing organization confidential information acquired as aresult ofprofessional andbusinessrelationshipswithout properandspecificauthorityorunless there is a legal or professional right or duty to disclose; and Using confidential information acquired as a result of professional and businessrelationships to their personal advantage or the advantage of third parties. T!e "#ll#$ing are circumstances $!ere pr#"essi#nal acc#untants are #r ma &e re*uired t#discl#se c#n"idential in"#rmati#n #r $!en suc! discl#sure ma &e appr#priate+ Disclosure is permitted by law and is authorized by the client or the employer;Disclosure is required by law, for eample!i. "roduction of documents or other provision of evidence in the course of legalproceedings; orii. Disclosure to the appropriate public authorities of infringements of the law that cometo light; andMd. Mokhlesur Rahman Mozid, ACMA There is a professional duty or right to disclose, when not prohibited by law!i. To comply with the quality review of a member body or professional body;ii. To respond to an inquiry or investigation by a member body or regulatory body;iii. To protect the professional interests of a professional accountant in legal proceedings;oriv. To comply with technical standards and ethics requirements.Pr#"essi#nal ,e!a(i#rTheprincipleofprofessional behavior imposesanobligationonprofessional accountants toc#mpl $it! rele(ant la$s and regulati#ns and a(#id an acti#n t!at ma &ring discredit t#t!epr#"essi#n. This includes actions whichareasonableandinformedthirdparty, havingknowledge of all relevant information, would conclude negatively affects the good reputation ofthe profession.T!reats and Sa"eguards1. Eamples of circumstances that may create sel"-interest threats for a professional accountantin public practice include, but are not limited to:# $ financial interest% in a client or &ointly holding a financial interest with a client.# Undue dependence on total fees from a client# 'aving a close business relationship with a client# (oncern about the possibility of losing a client# "otential employment with a client# Contingent fees% relating to an assurance engagement.# $ loan to or from an assurance client or any of its directors or officers!. Eamples of circumstances that may create sel"-re(ie$ threats include, but are not limited to:# The discovery of a significant error during a re)evaluation of the work of the professionalaccountant in public practice#*eportingontheoperationoffinancial systemsafterbeinginvolvedintheirdesignorimplementation# 'aving prepared the original data used to generate records that are the sub&ect matter ofthe engagement# $ member of the assurance teambeing, or having recently been, a director or officer% ofthat client# $ member of the assurance team being, or having recently been, employed by the client in aposition to eert direct and significant influence over the sub&ect matter of the engagement# "erforming a service for a client that directly affects the sub&ect matter of the assuranceengagementMd. Mokhlesur Rahman Mozid, ACMA". Eamples of circumstances that may create ad(#cac threats include, but are not limited to:# "romoting shares in a listed entity% when that entity is a financial statement audit client# $cting as an advocate on behalf of an assurance client in litigation or disputes with thirdparties#. Eamples of circumstances that may create "amiliarit t!reatsinclude, but are not limitedto:# $ member of the engagement team having a close or immediate family relationship with adirector or officer of the client# $ member of the engagement team having a close or immediate family relationship with anemployee of the client who is in a position to eert direct and significant influence over thesub&ect matter of the engagement# $ former partner of the firm being a director or officer of the client or an employee in aposition to eert direct and significant influence over the sub&ect matter of the engagement# $ccepting gifts or preferential treatment froma client, unless the value is clearlyinsignificant# +ong association of senior personnel with the assurance client$. Eamples of circumstances that may create intimidati#n threats include, but are not limitedto:# ,eing threatened with dismissal or replacement in relation to a client engagement.# ,eing threatened with litigation.# ,eing pressured to reduce inappropriately the etent of work performed in order to reducefees.Sa"eguards./ Sa"eguardsthat mayeliminateorreducesuchthreatstoanacceptablelevel fall intotwobroad categories: -afeguards created by the profession, legislation or regulation; and -afeguards in the work environment.2/ Sa"eguards created & t!e pr#"essi#n, legislation or regulation include, but are not restrictedto: .ducational, training and eperience requirements for entry into the profession (ontinuing professional development requirements (orporate governance regulations "rofessional standards"rofessional or regulatory monitoring and disciplinary proceduresMd. Mokhlesur Rahman Mozid, ACMA