Code of Ethics

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CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS IN THE PHILIPPINES

STRUCTURE OF THE CODE

PARTS APPLICABILITY
Part 1 - Complying with the Code, Applicable to all professional accountants (PA)
Fundamental Principles and Conceptual
Framework
Part 2 – Professional Accountants in Applicable to PAIBs when performing professional
Business (PAIBs) activities.

PAIBs include PAs engaged or contracted in an Also applicable to PAPPs when performing
executive or non-executive capacity in, for example: professional activities pursuant to their relationship
✓ Commerce, industry or service. with the firm, whether as a contractor, employee or
✓ The public sector.
owner.
✓ Education.
✓ The not-for-profit sector.
✓ Regulatory or professional bodies.
Part 3 – Professional Accountants in Applicable to PAPPs when performing professional
Public Practice (PAPPs) activities.
Part 4 – International Independence Part 4A – Independence for Audit and Review
Standards Engagements
Part 4B – Independence for Assurance
Engagements other than Audit and Review
Engagements

COMPLYING WITH THE CODE

A. DIFFERENCES BETWEEN REQUIREMENTS OF THE CODE AND LAWS AND


REGULATIONS - A professional accountant shall comply with the Code. However, in the
case that laws or regulations preclude a professional accountant from complying with certain
parts of the Code, the laws and regulations shall prevail and the PA shall comply with all other
parts of the code.

B. DIFFERENCES IN ETHICAL REQUIREMENTS – In the event when a professional


accountant performs services in a country other than the home country and differences on
specific matters exist between ethical requirements of the two countries, the professional
accountant should apply the code of ethics with stricter requirements.

FUNDAMENTAL PRINCIPLES
A. INTEGRITY – to be straightforward and honest in all professional and business relationships.

B. OBJECTIVITY – Not to compromise professional or business judgments because of bias,


conflict of interest or undue influence of others.

C. PROFESSIONAL COMPETENCE AND DUE CARE – (1) To attain and maintain professional
knowledge and skill at the level required to ensure that a client or employing organization
receives competent professional service; and (2) to act diligently and in accordance with
applicable technical and professional standards.
D. CONFIDENTIALITY – to respect the confidentiality of information acquired as a result of
professional and business relationships and, therefore, not disclose any such information to
third parties without proper and specific authority, unless there is a legal or professional right
or duty to disclose, nor use the information for the personal advantage of the professional
accountant or third parties.

E. PROFESSIONAL BEHAVIOR – To comply with relevant laws and regulations and avoid any
conduct that the professional accountant knows or should know might discredit the
profession.

CONCEPTUAL FRAMEWORK APPROACH

The environment and circumstances in which a professional accountant renders its services and
activities may create threats to compliance with the fundamental principles as previously
discussed. As such, the conceptual framework has been set out on the code to present
requirements on how to appropriately deal with these threats.

The conceptual framework specifies a three–step approach for PAs to:


1. Identify – threats to compliance with fundamental principles
2. Evaluate – the threats identified
3. Address - the threats by eliminating or reducing them to an acceptable level.

THREATS TO COMPLIANCE WITH THE FUNDAMENTAL PRINCIPLES

A. SELF-INTEREST THREAT – the threat that a financial or other interest will inappropriately
influence the professional accountant’s judgment or behavior.

B. SELF-REVIEW THREAT –the threat that a professional accountant will not appropriately
evaluate the results of a previous judgment made or service performed by the professional
accountant, or by another individual within the professional accountant’s firm or employing
organization, on which the accountant will rely when forming a judgment as part of providing
a current service.

C. ADVOCACY THREAT – the threat that a professional accountant will promote a client’s or
employer’s position to the point that the professional accountant’s objectivity is compromised.

D. FAMILIARITY THREAT – the threat that due to a long or close relationship with a client or
employer, a professional accountant will be too sympathetic to their interests or too accepting
of their work.

E. INTIMIDATION THREAT – the threat that a professional accountant will be deterred from
acting objectively because of actual or perceived pressures, including attempts to exercise
undue influence over the professional accountant.

SAFEGUARDS TO ADDRESS THE THREATS IDENTIFIED

Threats identified that are not at an acceptable level must be addressed in one of three ways:
1. Eliminating the circumstances, including interests or relationships, that are creating the
threats;
2. Applying safeguards, where available and capable of being applied, to reduce the threats
to an acceptable level; or
3. Declining or ending the specific professional activity.
SAFEGUARDS THAT MAY ELIMINATE OR REDUCE THREATS
TO AN ACCEPTABLE LEVEL

1. Safeguards created by the profession, legislation or regulation.


• Educational, training and experience requirements for entry into the profession.
• Continuing professional development requirements.
• Corporate governance regulations.
• Professional standards.
• Professional or regulatory monitoring and disciplinary procedures.
• External review by a legally empowered third party of the reports, returns,
communications or information produced by a professional accountant.

2. Safeguards in the work environment.


• Firm-wide safeguards
• Engagement specific safeguards.

INDEPENDENCE

Independence of mind
The state of mind that permits the expression of a conclusion without being affected by influences
that compromise professional judgment, thereby allowing an individual to act with integrity, and
exercise objectivity and professional skepticism.

Independence in appearance
The avoidance of facts and circumstances that are so significant that a reasonable and informed
third party would be likely to conclude, weighing all the specific facts and circumstances, that a
firm’s, or a member of the audit or assurance team’s integrity, objectivity or professional
skepticism has been compromised.

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