WRITTEN REPORT

CHAPTER 5
MAS PRACTICE STANDARDS AND ETHICAL CONSIDERATIONS
(Continuation)

D. Confidentiality
The principle of confidentiality imposes an obligation on
professional accountants to refrain from:
a. Disclosing outside the firm or employing organization confidential
information acquired as a result of professional and business relationships
without proper and specific authority or unless there is a legal or professional
right or duty to disclose.
b. Using confidential information acquired as a result of professional and
business relationships to their personal advantage or the advantage of third
parties.
Confidentiality is not only a matter of disclosure of information.
Accountants who acquire information in the course of performing services shall
neither use nor appear to use that information for personal advantage or for the
advantage of a third party. (J. Salosagcol, M. Tiu, R. Hermosilla (2018) Auditing
Theory, Page 614, Par. 2).

Information may be disclosed if:

1. Disclosure is permitted by the client or employer.
2. Disclosure is required by Law.
3. There is a professional duty or right to disclose confidential
information.

E. Professional Behavior
The principle of professional behavior imposes an obligation on
professional accountants to comply with relevant laws and regulations and avoid
any action that may bring discredit to the profession. This includes actions which
reasonable and informed third party, having knowledge of all relevant
information, would conclude negatively affects the good reputation of the
profession.

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ETHICAL CONFLICT RESOLUTION
In ethical conflict resolution, How can we identify or evaluate if the
professional accountant is not complying with the fundamental principles that the
Section 100.4 of the Revised Code Describes?
The professional accountants shall not only evaluate compliance with the
fundamental principles but also they are required to resolve the conflict regarding
the application of those principles.
When initiating a formal or informal conflict resolution process or the
process used by the accountant to resolve the conflict, they should consider:
1. Relevant Facts regarding the conflict
2. Ethical Issued involve like Fraud or Negligence
3. Fundamental principles related to the matter in question, The
principle of integrity
4. Established internal procedures
5. Alternative courses of action
Having considered these issues, the professional accountant should
determine the appropriate course of action that is consistent with the
fundamental principles identified. Consistency is important. The Accountant
should also weigh the consequences of each possible course of action.
If the conflict is within the organization, the professional accountant
should also consider consulting with those charged with governance, such as the
board of directors or the audit committee.
It may also the best for the professional account to document the
substance of the issue and the details od any discussions held or desicions
taken, concerning that issue.
If a significant conflict cannot be resolved, a professional accountant may
wish to obtain advice from the relevant professional bodies or legal advisors to
obtain guidance on ethical issues without breaching confidentiality. The
professional accountant should obtain legal advice to determine whether there is
a requirement to report.
If, after exhausting all relevant possibilities, the ethical conflict remains
unresolved, a professional accountant should, if possible, refuse to remain
associated with the matter creating the conflict. The professional accountant may
determine that, in the circumstances, it is appropriate to withdraw from
engagement team or specific assignment or to resign altogether from the

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engagement, the firm or the employing organization.
There are also circumstances that the professional accountants operate
may create threats to compliance with fundamental principles.

Threats to Compliance with Fundamental principles:

1. Self-interest threat
2. Self-review threat
3. Advocacy threat
4. Familiarity threat
5. Intimidation threat
(J. Salosagcol, M. Tiu, R. Hermosilla (2018) Auditing Theory, Page 615, Par. 3).

SOME ETHICAL ISSUES

Once the firm becomes a going concern, some ethical challenges
become the unique issues related to its success. In ambiguous situations when
policy and precedent do not apply, the author of the book advises:

"Do the right thing. You can't do much better than consistently try to do the right
thing."

How would you for instance, respond to these challenges?

1. If a consultant is in demand, should he simply charge the highest fee possible

and not even worry about the perceived value?
Should you change the highest fees you can get away with?
If one is charging on a fee basis and the client is aware of and accepts
the fee, the client has obviously determined that the value is worth the
investment.
a. It is never advisable to over promise and undelivered.
b. Padding days or hours goes beyond an ethical transgression - it is
theft.

2. A consultant says that he travels first class, stays on the concierge floor of the
best hotels and prefers limousines over taxis. He believes that it is worth it and
as long as he is honest about it, the client should be billed for his normal travel
preferences.

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Should you travel first class and bill the client?
If the client approves of a luxurious travel style, there is no problem.
However, the consultant's primary goal is improve the client's condition.
a. If the client does not offer it, don't abuse it.
b. If one wants to travel first class, use limos and the best hotels, charge
the client for economy, taxis and standard hotel rates and shoulder
the luxury travel difference out of his personal pocket.

3. A competitor of one of the consultant's largest clients wants to hire the

consultant because his reputation has been associated with his clients success.
Is there any problem with taking on competitive organizations?
Should you accept an assignment from client's competitor?
There is nothing wrong with working with several clients within the same
industry.
a. Make it a condition that the consultant will not be asked to do
anything that will reveal confidential information; directly or indirectly.
b. Try to assign different personnel to each project.
c. Inform the present client of the competitor's request and the tentative
project and ask the client if it wishes the consultant to decline the
offer.
d. If the new assignment is accepted, the consultant should not divulge
anything learned to the current client.

CODE OF ETHICS FOR MANAGEMENT CONSULTANT

Code of conduct for management consultants represents the attitude, principles

and approaches that have been found to contribute to most to success and make
for equitable and satisfactory client relationship.

The common principles found in the code of ethics developed by AICPA, Institute
of Management Consultants and Association of Management Consulting Firms
are classified into four areas:
I. Basic Responsibilities
II. Practice Standards
III. Fee arrangements
IV. Business Conduct

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I. Basic Responsibilities for Management Consultants

1. Integrity and Objectivity

a. Do not knowingly misinterpret facts and never subordinate judgment to
others.
b. Place the interests of clients ahead of personal interests
c. Do not assume the role of management or take any positions that
might impair objectivity.

A professional accountant should be straight forward and honest in professional

and business relationships. (J. Salosagcol, M. Tiu, R. Hermosilla (2018) Auditing
Theory, Page 612, Integrity, Par. 1)

The principle of objectivity imposes the obligation on all professional accountants

to be fair, intellectually honest and free of conflict of interest, (J. Salosagcol, M.
Tiu, R. Hermosilla (2018) Auditing Theory, Page 612, Objectivity, Par. 1)

2. Independence
a. Take an independent position with the client.
b. Do not serve an enterprise without independence.
c. Do not serve two or more competing clients in areas of vital interest
without informing each client.

3. Confidential information
a. Guard as confidential all information concerning the affairs of the client.
b. Do not take advantage of material or inside information.
c. Do not disclose any confidential information obtained in the course of a
professional engagement except with the client's consent.

II. Practice Standards for Management Consultants

1. Professional Competence

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 a. Undertake only engagements that can be completed with professional
competence.
b. Accept only assignments for which the necessary qualifications are
possessed.
c. Present qualifications for serving a client solely in terms of
competence, experience and standing.

2. Planning, supervision and due care

a. Adequately plan and supervise an engagement.
b. Assign personnel qualified by knowledge, experience and character.
c. Exercise due professional care in the performance of an engagement.
3. Reporting results
a. Develop solutions that are realistic and practical and that can be
implemented promptly and economically.
b. Acquaint client personnel with the principles, methods, and techniques
applied.
c. Do not guarantee any specific result.

III. Fee structure standards for management consultants

a. Charge reasonable fees that are commensurate with the nature of
services performed and responsibility assumed.
b. Where feasible, agree with the client in advance in the fee or fee
basis.
c. Do not pay a fee or commission to obtain a client or franchise a
business; do not accept a commission, fee or other valuable
consideration for recommending products or services.

A professional accountant in public practice should not pay or receive a referral

fee or commission, unless the professional accountant in public practice has
established safeguards to eliminate the threats or reduce them to an acceptable
level. (J. Salosagcol, M. Tiu, R. Hermosilla (2018) Auditing Theory, Page 630,
Integrity, Par. 2)

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IV. Business-Conduct standards for Management Consultants
a. Strive continuously to advance and protect the standards of the
consulting profession.
b. Share methods and techniques used in serving clients.
c. Do not concurrently engage in any business or occupation that would
create a conflict of interest in rendering professional services.

NABARTEY, MARLOU D.
CBET-01-902E
AC19
MANAGEMENT CONSULTANCY