CIMA F1 Syllabus A. Regulatory Environment Of Financial Reporting - A Code Of Ethics - Notes ^{7 / 7}

has 5 main principles that professional accountant should follow:

1. Confidentiality

2. Objectivity

3. Professional skill and due care

4. Professional Behaviour

5. Integrity

Ethical codes come from law, employers, religion and social attitudes.

Example

You know enough about tax to carry out your daily work, but you are not an expert on the areas of imports and exports on which your client is asking your opinion.

What ethical issue does this situation raise?

• This raises issues of professional competence and due care. 

  You know that you do not have the knowledge to answer these questions at this time and in this situation. 

  The most appropriate form of action would be to make an appointment with the client to discuss the matter properly after you have done some research into these specific areas, or refer them to a colleague with experience in this area.

How should an accountant use this code?

• Identify any threats they may face to these principles

• See if the threat is significant

• Use safeguards to reduce the threat

Example

A qualified accountant holds a number of shares in his employing company, and has become eligible for a profit-related bonus for the first time.

What type of threat could this represent to his objectivity when preparing the company's financial statements?

• The threat is Self-Interest 

  Therefore the auditor may not act with objectivity and independence.

  If such threats are significant (ie the interest is direct and of high value), safeguards will have to be put in place.

The accountant should disclose confidential information:

1. When authorised by the client

2. When required by law

3. To protect the professional interests of an accountant in a legal action