Section 3 Code of Ethics and Conduct

3.1 Introduction

1.	ACCA registered students, affiliates and members are required to observe proper standards of professional conduct.

ACCA registered students, affiliates and members must specifically refrain from what is described in ACCA's bye-law 8(a)(i) as misconduct. Registered students, affiliates and members must also refrain from taking any action which amounts to a departure from the standards set out in this Code of Ethics and Conduct as specified in bye-law 8(a)(ii).

3.	Those failing to observe the standards expected of them may be required to answer a complaint before ACCA's Disciplinary Committee.

It is not possible to specify all those combinations of circumstances in which a member may be held by Disciplinary Committee to have committed professional misconduct, as defined above. However, this section of the Rulebook (which may be added to or varied from time to time) sets out ACCA's ethical requirements in relation to those professional situations that most commonly arise.

5.	ACCA registered students, affiliates and members who are in doubt as to their correct course of action in particular cases should obtain further guidance from ACCA. It is advisable to seek guidance prior to embarking on a course of action.

6.	Where statutory and regulatory requirements are concerned, ACCA registered students, affiliates and members are reminded that they must also refer to, and comply with, the legislation and regulatory requirements of the countries in which they work.

7.	The Code of Ethics and Conduct applies to all registered students, affiliates and members.

Registered students and affiliates

8.	Registered students and affiliates are bound by the ethical requirements of ACCA, as affirmed by their signature on the application forms to be enrolled as registered students.

9.	Registered students remain bound by ACCA's ethical requirements during the period between successful completion of the examinations and their admission to membership (i.e. those having affiliate status). On admission to membership they become subject to the same requirements in their new capacity.

10.

For ease of drafting, reference throughout the Code of Ethics and Conduct will be made to "members". Registered students and affiliates should note that the rules and guidance contained within the Code of Ethics and Conduct also apply to them.

The relationship between the Code of Ethics and Conduct and other regulations

11.

In some specialist areas of work, such as audit, insolvency and financial services, members are subject to a variety of statutory and regulatory requirements. Where the Code of Ethics and Conduct imposes a more stringent requirement than statutory and regulatory requirements, or vice versa, the more stringent requirement will apply, unless prohibited by law or regulation.

Failure to comply with the Code of Ethics and Conduct

12.

An ACCA registered student, affiliate or member who fails to comply with the Code of Ethics and Conduct will be liable to disciplinary action.

Enforcement of the Code of Ethics and Conduct

13.

Two committees have been appointed by Council to enforce ACCA's ethical standards: Disciplinary and Appeal. The committees derive their powers from the bye-laws.

The Code of Ethics and Conduct

14.

The Code of Ethics and Conduct establishes the ethical requirements for members. It sets out the fundamental principles and provides a conceptual framework for applying those principles.

15.

Members are required to apply this conceptual framework to identify threats to compliance with the fundamental principles, to evaluate their significance and, if such threats are other than clearly insignificant, to apply safeguards to eliminate them or reduce them to an acceptable level such that compliance with the fundamental principles is not compromised.

16.

Throughout the Code of Ethics and Conduct, examples are included that are intended to illustrate how the conceptual framework is to be applied. The examples are not intended to be, nor should they be interpreted as, an exhaustive list of all circumstances experienced by members that may create threats to compliance with the fundamental principles. Consequently, it is not sufficient for members to merely comply with the examples presented; rather, the framework should be applied to the particular circumstances encountered by members.

17.

A distinguishing mark of the accountancy profession is its acceptance of the responsibility to act in the public interest. Therefore, members' responsibility is not exclusively to satisfy the needs of an individual client or employer. In acting in the public interest, members should observe and comply with the ethical requirements of this Code.

Definitions

18.

In this Code of Ethics and Conduct, the following expressions are defined as follows:

advertising means the communication to the public of information as to the services or skills provided by members with a view to procuring professional business;

assurance client means the responsible party that is the person (or persons) who:

in a direct reporting engagement, is responsible for the subject matter information; or

in an assertion-based engagement, is responsible for the subject matter information and may be responsible for the subject matter;

(For an assurance client that is a financial statement audit client see the definition of financial statement audit client.)

assurance engagement means an engagement in which members express a conclusion designed to enhance the degree of confidence of intended users other than the responsible party about the outcome of the evaluation or measurement of a subject matter against criteria;

(For guidance on assurance engagements see the International Framework for Assurance Engagements issued by the International Auditing and Assurance Standards Board which describes the elements and objectives of an assurance engagement and identifies engagements to which International Standards on Auditing (ISAs), International Standards on Review Engagements (ISREs) and International Standards on Assurance Engagements (ISAEs) apply.)

assurance team means:

all members of the engagement team for the assurance engagement;

all others within a firm who can directly influence the outcome of the assurance engagement, including:

those who recommend the compensation of, or who provide direct supervisory, management or other oversight of, the assurance engagement partner in connection with the performance of the assurance engagement. For the purposes of a financial statement audit engagement, this includes those at all successively senior levels above the engagement partner through the firm's chief executive;

those who provide consultation regarding technical or industry specific issues, transactions or events for the assurance engagement; and

those who provide quality control for the assurance engagement;

for the purposes of a financial statement audit client, all those within a network firm who can directly influence the outcome of the financial statement audit engagement;

clearly insignificant means a matter that is deemed to be both trivial and inconsequential;

close family means a parent, child or sibling, who is not an immediate family member;

contingent fee means a fee calculated on a predetermined basis relating to the outcome or result of a transaction or the result of the work performed. A fee that is established by a court or other public authority is not a contingent fee;

direct financial interest means a financial interest:

dotbullet

owned directly by and under the control of an individual or entity (including those managed on a discretionary basis by others); or

dotbullet

beneficially owned through a collective investment vehicle, estate, trust or other intermediary over which the individual or entity has control;

director and officer means those charged with the governance of an entity, regardless of their title, which may vary from country to country;

engagement partner means the partner or other person in the firm who is responsible for the engagement and its performance, and for the report that is issued on behalf of the firm, and who, where required, has the appropriate authority from a professional, legal or regulatory body;

engagement quality control review means a process designed to provide an objective evaluation, before the report is issued, of the significant judgements the engagement team has made and the conclusions they reached in formulating the report;

engagement team means all personnel performing an engagement, including any experts contracted by the firm in connection with that engagement;

existing accountant means an individual or firm currently holding an audit appointment or carrying out accounting, taxation, consulting or similar services for a client;

financial interest means an interest in an 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;

financial statement audit client means an entity in respect of which a firm conducts a financial statement audit engagement. When the audit client is a listed or other public interest entity, financial statement audit client will always include its related entities;

financial statement audit engagement means a reasonable assurance engagement in which members express an opinion whether the financial statements are prepared in all material respects in accordance with an identified financial reporting framework, such as an engagement conducted in accordance with International Standards on Auditing. This includes a statutory audit which is a financial statement audit required by legislation or other regulation;

financial statements means the balance sheets, income statements or profit and loss accounts, statements of changes in financial position (which may be presented in a variety of ways, for example as a statement of cash flows or a statement of fund flows), notes and other statements and explanatory material which are identified as being part of the financial statements;

a sole practitioner, partnership or corporation of professional accountants;

an entity that controls such parties through ownership, management or other means; and

an entity controlled by such parties through ownership, management or other means;

immediate family means a spouse (or equivalent) or dependant;

independence means:

dotbullet

independence of mind – the state of mind that permits the provision of an opinion without being affected by influences that compromise professional judgement, allowing an individual to act with integrity, and exercise objectivity and professional judgement; and

dotbullet

independence in appearance – the avoidance of facts and circumstances that are so significant that a reasonable and informed third party, having knowledge of all relevant information, including any safeguards applied, would reasonably conclude a firm's, or a member of the assurance team's, integrity, objectivity or professional scepticism had been compromised; and

indirect financial interest means a financial interest beneficially owned through a collective investment vehicle, estate, trust or other intermediary over which the individual or entity has no control;

key audit partner means an audit partner of the assurance team (including engagement partner) who is at group level responsible for reporting on significant matters, such as on significant subsidiaries or divisions of the financial statement audit client, or on significant risk factors that relate to the financial statement audit of that client. Where there are no group accounts, the definition should be taken to refer to company level;

key management position means any position at the financial statement audit client which involves the responsibility for fundamental management decisions that include the ability to influence the accounting policies and the preparation of the financial statements of the financial statement audit client. A key management position also includes contractual and factual arrangements which by substance allow an individual to participate in exercising this management function in a different way, e.g. via a consulting contract. Such a position would generally include appointments as director and anyone in a senior financial position on whose advice the directors are accustomed to act;

listed entity means an entity whose shares, stock or debt are quoted or listed on a recognised stock exchange, or are marketed under the regulations of a recognised stock exchange or other equivalent body;

members in business means members employed or engaged in an executive or non-executive capacity in such areas as commerce, industry, service, the public sector, education, the not-for-profit sector, regulatory bodies or professional bodies, or members contracted by such entities;

members in public practice means members, irrespective of functional classification (for example, audit, tax or consulting) in a firm that provides professional services. This term is also used for firms in public practice;

network¹ means a larger structure:

that is aimed at co-operation; and

that is clearly aimed at profit or cost sharing or shares common ownership, control or management, common quality control policies and procedures, a common business strategy, the use of a common brand name, or a significant part of professional resources;

network firm means a firm or entity that belongs to a network;

office means a distinct sub-group, whether organised on geographical or practice lines;

professional services means services requiring accountancy or related skills performed by members including accounting, auditing, taxation, investment business, management consulting and financial management services;

public interest entities means entities, other than listed entities, which are of significant public interest because of their business, their size or their number of employees or their corporate status is such that they have a wide range of stakeholders. Examples of such entities might include credit institutions (for example banks), insurance companies, investment firms and pension firms;

related entity means an entity that has any of the following relationships with the client:

an entity that has direct or indirect control over the client provided the client is material to such entity;

an entity with a direct financial interest in the client provided that such entity has significant influence over the client and the interest in the client is material to such entity;

an entity over which the client has direct or indirect control;

an entity in which the client, or an entity related to the client under (c) above, has a direct financial interest that gives it significant influence over such entity and the interest is material to the client and its related entity in (c); and

an entity which is under common control with the client (hereinafter a "sister entity") provided the sister entity and the client are both material to the entity that controls both the client and sister entity.

¹ This definition is to be read in the context of the guidance provided in paragraphs 21 to 34 in section 3.4, Integrity, objectivity and independence.

Copyright Notice

© 2010, Association of Chartered Certified Accountants All rights reserved.