Steps an Auditor Should Take in Relation to Breaches of ACCA’s Code of Ethics and Conduct

1. Identify the Breach

The first step is to identify and confirm the breach of the Code of Ethics. This involves understanding the nature of the breach and which fundamental principle(s) it violates. The five fundamental principles are:

• Integrity: Being straightforward and honest in all professional and business relationships.
• Objectivity: Not allowing bias, conflicts of interest, or undue influence to override professional or business judgments.
• Professional Competence and Due Care: Maintaining professional knowledge and skill at the required level and acting diligently.
• Confidentiality: Respecting the confidentiality of information acquired as a result of professional and business relationships.
• Professional Behavior: Complying with relevant laws and regulations and avoiding any conduct that discredits the profession.

2. Evaluate the Threats

Once a breach is identified, the auditor should evaluate the threats to compliance with the fundamental principles. The ACCA Code of Ethics outlines several types of threats, including:

• Self-interest threat
• Self-review threat
• Advocacy threat
• Familiarity threat
• Intimidation threat

3. Implement Safeguards

If the threats are not at an acceptable level, the auditor must implement appropriate safeguards to eliminate the threats or reduce them to an acceptable level. Safeguards can include:

• Consulting with a professional body or regulatory authority.
• Seeking legal advice.
• Implementing additional review procedures.
• Removing the individual causing the threat from the engagement team.

4. Document the Breach and Actions Taken

The auditor should document the breach, the evaluation of the threats, and the safeguards implemented. This documentation should be thorough and include:

• The nature of the breach.
• The evaluation process.
• The safeguards applied.
• Any consultations or advice received.

5. Report the Breach

If the breach is significant and cannot be mitigated by safeguards, the auditor may need to report the breach to the appropriate authority within the organization or to an external regulatory body. This step is crucial to maintain transparency and uphold the integrity of the profession.

6. Review and Revise Engagement Terms

Depending on the severity of the breach, the auditor may need to review and possibly revise the terms of the engagement. In extreme cases, it may be necessary to withdraw from the engagement to avoid further ethical conflicts.

7. Seek Guidance and Support

Throughout the process, the auditor should seek guidance and support from ACCA’s advisory services or other professional bodies. This ensures that the auditor is following the correct procedures and upholding the highest ethical standards.

Conclusion

By following these steps, an auditor can effectively address breaches of ACCA’s Code of Ethics and Conduct, ensuring that they maintain professional integrity and uphold the reputation of the accounting profession.