CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS

Requirements

Ethical Requirements Relating to an Audit of Financial Statements

The auditor shall comply with relevant ethical requirements, including those pertaining to

independence, relating to financial statement audit engagements.

- The auditor is subject to relevant ethical requirements, including those pertaining to

independence, relating to financial statement audit engagements. Relevant ethical

requirements ordinarily comprise Parts A and B of the International Ethics Standards

Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code)

related to an audit of financial statements together with national requirements that are

more restrictive.

- Part A of the IESBA Code establishes the fundamental principles of professional ethics

relevant to the auditor when conducting an audit of financial statements and provides a

conceptual framework for applying those principles. The fundamental principles with

which the auditor is required to comply by the IESBA Code are:

(a) Integrity;

(b) Objectivity;

(c) Professional competence and due care;

(d) Confidentiality; and

(e) Professional behavior.

Part B of the IESBA Code illustrates how the conceptual framework is to be applied in specific

situations.

FUNDAMENTAL PRINCIPLES, THREATS AND SAFEGUARDS

Fundamental Principles

The IESBA Code of Ethics requires accountants to adhere to five fundamental principles:

i. Integrity —a professional accountant should be straightforward and honest in

performing professional services.

ii. Objectivity—a professional accountant should not allow bias, conflict of interest or

undue influence of others to override professional or business judgments.

iii. Professional Competence and Due Care—a professional accountant has a continuing

duty to maintain professional knowledge and skill at the level required to ensure that a

client or employer receives competent professional service based on current

developments. A professional accountant should act diligently and in accordance with

applicable technical and professional standards when providing professional services.

iv. Confidentiality—A professional accountant should respect the confidentiality of

information acquired as a result of professional and business relationships and should 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. Confidential information acquired

as a result of professional and business relationships should not be used for the personal

advantage of the professional accountant or third parties.

v. Professional Behavior—a professional accountant should comply with relevant laws and

regulations and should avoid any action that discredits the profession.

Threats and Safeguard

-Compliance with the fundamental principles may potentially be threatened by a broad range of

circumstances. Many threats fall into the following categories:

a. Self-interest threats, which may occur as a result of the financial or other interests of a

professional accountant or of an immediate or close family" member;

b. Self-review threats, which may occur when a previous judgment needs to be re-valuated

by the professional accountant responsible for that judgment;

c. Advocacy threats, which may occur when a professional accountant promotes a position

or opinion to the point that subsequent objectivity may be compromised;

d. Familiarity threats, which may occur when, because of a close relationship, a professional

accountant becomes too sympathetic to the interests of others; and

e. Intimidation threats, which may occur when a professional accountant may be deterred

from acting objectively by threats, actual or perceived.

Safeguards that may eliminate or reduce such threats to an acceptable level fall into two broad

categories:

a. Safeguards created by the profession, legislation or regulation; and

b. Safeguards in the work environment.

Safeguards created by the profession, legislation or regulation include, but are not restricted to:

- 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.

- Externally review by a legally empowered third party of the reports, returns,

communications or information produced by a professional accountant.

Certain safeguards may increase the likelihood of identifying or deterring unethical behavior.

Such safeguards, which may be created by the accounting profession, legislation, regulation or

an employing organization, include, but are not restricted to:

- Effective, well publicized complaints systems operated by the employing organization,

the profession or a regulator, which enable colleagues, employers and members of the

public to draw attention to unprofessional or unethical behaviour

- An explicitly stated duty to report breaches of ethical requirements.

The nature of the safeguards to be applied will vary depending on the circumstances. In

exercising professional judgment, a professional accountant should consider what a reasonable

and informed third party, having knowledge of all relevant information, including the

significance of the threat and the safeguards applied, would conclude to be unacceptable.

ADVERTISING, PUBLICITY, OBTAINING PROFESSIONAL WORK AND FEES AND

MONEY LAUNDERING.

ADVERTISING

Promotional materials and advertisements must not;

- Discredit ACCA members, firms or the accountancy profession..

- claim superiority

- mislead

- fall short of standards regarding legality decency, clarity honesty and truthfulness

PUBLICITY

This is communication to the public of facts which are not designed for deliberate promotion.

Acceptable publicity includes

- Appointments and approval.

- Seeking employment or professional business\in professional directories but entry must

not to be a promotional advertisement

- Books articles, interviews, lectures, media appearances.

- Training courses and seminars but must not have undue prominence in materials issued.

AUDIT FEES

General basis on which fees are computed should be set out in the letter of engagement.

Members can charge whatever they consider appropriate. The following factors should be

considered;

- Seniority and professional expertise of persons engaged in work

- Time taken

- Risk and responsibility entailed in work.

- Urgency and importance of work to client.

- Overhead expenses

A firm may obtain assurance engagement for a fee level that is significantly lower than that charged

by the predecessor firm or quoted by another firm. This creates a self interest threat that will not

be reduced to an acceptable level unless the firm can demonstrate that appropriate time and

qualified staff are assigned to the task and that all applicable assurance standards, guidelines and

quality control procedures are complied with

Contingency fee means that no fee is charged unless a specified finding or result is obtained.

Fess should not be charged on a %’ contingency or similar basis except where it is generally

accepted

In assurance engagements fees must not be calculated on a percentage or contingency basis. In

non-assurance engagements contingent fees are not acceptable. The threat of contingent fee

arrangement for non-assurance clientswill depend on the possible range and degree of variability

of the fee The threat maybe reduced by prior approval by an audit committee or an independent

third party

Fee quotations - If a fee quotation is not economical, there maybe a self-interest threat. The firm

must be able to demonstrate that appropriate time and qualified staff are assigned to the task and

that all applicable assurance standards guidelines and quality control procedures are being

complied with

FEES DISPUTES MAY BE DEALT WITH AS FOLLOWS

- Variations between the notes should be explained e.g. reasons for extra work.

- If a client pays a smaller amount, it must be stated, in writing. That is accepted as part

payment and not full discharge of the amount owed.

- Both parties to a fee dispute may make a written application to ha an arbitrator appointed.

- A particular lien maybe exercised over certain books and papers which have been worked

on.

MONEY LAUNDERING

Money laundering is the process by which funds derived from criminal activity (“dirty money”)

are given the appearance of having been legitimately obtained, through a series of transactions in

which the funds are cleaned. Its purpose is to provide a legitimate cover for the source of the

money.

Money laundering is a global phenomenon that affects all countries to varying degrees. By its

very nature, it is a hidden activity and involves various actor and is a white collar crime.

It is important for auditors conducting forensic audit to understand what money laundering

entails, the International and domestic legal and institutional framework to combat money

laundering.

FORENSIC INVESTIGATION IN ML

Crime investigation mainly involves forensic auditing of accounts and documents, examination

of bank statements and various records and statements filed by the companies or Govt. Agencies.

} Forensic auditing is a technique to legally determine whether accounting transactions are in

consonance with various accounting, auditing and legal requirements and eventually determine

whether any crime has taken place.

Forensic auditing is a blend of accounting, auditing and investigative skills. } Forensic

examination of documents is also required to be done to verify the signature, handwriting etc

STEPS INVOLVED IN FORENSIC AUDITING

- Detailed examination of financial statements and books of accounts.

- Examination of related party transactions and Inter-corporate Deposits as disclosed in the

financial statements

- Auditing of off Balance sheet items.

ROLE OF ACCOUNTANTS IN AML AND FINANCIAL CRIME INVESTIGATIONS

- Report suspicious transactions

- Maintain and keep proper accounting records and when required be made available to

law enforcement agencies.

- Undertake customer due diligence to identify the beneficial owner } Verify the

legitimacy of funds.

- Duty to ensure that financial statements are true and fair view of legal entities

PROFESSIONAL SKEPTICISM

The auditor shall plan and perform an audit with professional skepticism recognizing that

circumstances may exist that cause the financial statements to be materially misstated.

Professional skepticism includes being alert to, for example:

- Audit evidence that contradicts other audit evidence obtained.

- Information that brings into question the reliability of documents and responses to

inquiries to be used as audit evidence.

- Conditions that may indicate possible fraud.

- Circumstances that suggest the need for audit procedures in addition to those required by

the ISAs.

Maintaining professional skepticism throughout the audit is necessary if the auditor is, for

example, to reduce the risks of:

- Overlooking unusual circumstances.

- Over generalizing when drawing conclusions from audit observations.

- Using inappropriate assumptions in determining the nature, timing and extent of the audit

procedures and evaluating the results thereof.

- Professional skepticism is necessary to the critical assessment of audit evidence. This

includes questioning contradictory audit evidence and the reliability of documents and

responses to inquiries and other information obtained from management and those

charged with governance. It also includes consideration of the sufficiency and

appropriateness of audit evidence obtained in the light of the circumstances, for example,

in the case where fraud risk factors exist and a single document, of a nature that is

susceptible to fraud, is the sole supporting evidence for a material financial statement

amount.

- The auditor may accept records and documents as genuine unless the auditor hasreason to

believe the contrary. Nevertheless, the auditor is required to consider thereliability of

information to be used as audit evidence. In cases of doubt about thereliability of

information or indications of possible fraud (for example, if conditionsidentified during

the audit causes the auditor to believe that a document may not be authentic or that terms in

a document may have been falsified), the ISAs requirethat the auditor investigate further

and determine what modifications or additions to audit procedures are necessary to

resolve the matter.

- The auditor cannot be expected to disregard past experience of the honesty andintegrity

of the entity’s management and those charged with governance.Nevertheless, a belief that

management and those charged with governance arehonest and have integrity does not

relieve the auditor of the need to maintainprofessional skepticism or allow the auditor to

be satisfied with less than persuasive audit evidence when obtaining reasonable assurance.

Professional Judgment

The auditor shall exercise professional judgment in planning and performing an audit of financial

statements.

Professional judgment is essential to the proper conduct of an audit. This is because

interpretation of relevant ethical requirements and the ISAs and the informed decisions required

throughout the audit cannot be made without the application of relevant knowledge and

experience to the facts and circumstances. Professional judgment is necessary in particular

regarding decisions about:

- Materiality and audit risk.

- The nature, timing and extent of audit procedures used to meet the requirements of the

ISAs and gather audit evidence.

- Evaluating whether sufficient appropriate audit evidence has been obtained, and whether

more needs to be done to achieve the objectives of the ISAs and thereby, the overall

objectives of the auditor.

- The evaluation of management’s judgments in applying the entity’s applicable financial

reporting framework