CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS

INTERNATIONAL ETHICS STANDARDS BOARD FOR ACCOUNTANTS

( IESBA )

TODAY’S AGENDA

1. INTRODUCTION

2. HIGHLIGHTS OF THE CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS – IESBA

3. CHANGES TO THE CODE – RESPONDING TO NON-COMPLIANCE WITH LAWS AND REGULATIONS = NOCLAR

4. CONCLUSION

INTRODUCTION

NOTE:

The distinguishing mark of the Accountancy Profession is its acceptance of the profession’s responsibility to act in the public interest.

The Code of Conduct for Professional Accountants is contained in the Code of Ethics issued by the International Ethics Standards Board of IFAC. Tanzania has adopted it fully

INTRODUCTION ( CONT. )

The Code of Ethics is binding to all members of the profession i.e. members in public practice ( partners and staff ) and those in business and public service

INTRODUCTION ( CONT. )

IESBA CODE OF ETHICS :-PART A : General Application of the IESBA

Code to all Professional Accountants PART B: Application of the IESBA Code to

Professional Accountants in PublicPractice

PART C: Application of the IESBA Code to Professional Accountants in Business

NOCLAR: Applicable to all Accountants

IESBA

CODE OF ETHICS FOR ACCOUNTANTS

GENERAL APPLICATION OF THE IESBA CODE

PART A OF THE CODE ESTABLISHES:

Fundamental Principles of Professional Ethics for Professional Accountantsand provides

Conceptual Framework to be applied by Professional Accountants in order to identify, evaluate threats and apply safeguards to eliminate or reduce the threats to an acceptable level

PART A

FUNDAMENTAL PRINCIPLES:

1)Integrity: This requires the Professional

Accountant to

to be straight forward and honest

not to be associated knowingly with reports, returns, communication etc. where the accountant believes are materially false or misleading; or recklessly furnished; or omits or obscures information

PART A

FUNDAMENTAL PRINCIPLES: ( Cont. )

2)Objectivity: This requires the Professional Accountant not to compromise professional judgment because of bias, conflict of interest or undue influence of other parties

PART A

FUNDAMENTAL PRINCIPLES: ( Cont. )3) Professional Competence and Due Care

This imposes the following obligations to the Professional Accountant to:

Maintain professional knowledge and skill at required levels

Act diligently according to applicable technical and professional standards

Ensure that those working under him/her haveappropriate training and supervision

Tell the client his/her limitations

PART A

FUNDAMENTAL PRINCIPLES: ( Cont. )

4) Confidentiality

This imposes an obligation to the Professional

Accountant to refrain from:

Disclosing confidential information without specific authority

Using confidential information for personal advantage or advantage of third parties

PART A

FUNDAMENTAL PRINCIPLES: ( Cont. )

5) Professional Behavior

This imposes an obligation to the Professional Accountant to comply with relevant laws and regulations and avoid any action which may discredit the profession. Therefore members shall behave with courtesy and consideration towards those with whom they come into contact in a professional capacity

PART A

IESBA ESTABLISHES CONCEPTUAL FRAMEWORK APPROACH

Because professional accountants operate in different circumstances

and

the nature of their engagements and work assignments may differ and therefore:

Impossible to define every situation and every threat faced by the accountant

PART A

CONCEPTUAL FRAMEWORK APPROACH

This approach requires the Professional Accountant to :

Identify threats to compliance with Fundamental Principles

Evaluate the significance of the threats and

Apply safeguards to eliminate the threats or reduce them to acceptable levels

PART A

Categories of threats to Compliance with Fundamental Principles:

a) Self interest threats

b) Self review threats

c) Advocacy threats

d) Familiarity threats

e) Intimidation threats

PART A

The professional accountant must identify, evaluate and apply safeguards which may eliminate threats or reduce them to an acceptable level.

Safeguards fall into two categories:

Safeguards created by the profession, legislation or regulation

Safeguards in the work environment

PART A

CONFLICTS IN COMPLYING WITH FUNDAMENTAL PRINCIPLES:

Conflicts may be with or within the organization where a professional activity takes place. A threat to objectivity or other fundamental principles may arise; e.g.

Activity done for conflicting parties

Conflict of interest between the accountant and the client

PART A

ETHICAL CONFLICT RESOLUTION

When considering to resolve a conflict in complying with the Fundamental Principles,

the following factors may be relevant:

a) Relevant facts

b) Ethical issues involved

c) Fundamental Principle in question

d) Established internal procedures

e) Alternative courses of action available

PART B: APPLICATION OF THE IESBA CODE TO PROFESSIONAL ACCOUNTANTS IN PUBLIC

PRACTICE

This part provides guidelines on how the Conceptual Framework Approach in Part A is applied to various situations faced by the Professional Accountant in Public Practice. Threats fall in one or more of the following categories:

a) Self-interest

b) Self-review

c) Advocacy

d) Familiarity and

e) e) Intimidation

PART B

Professional Appointment

This section provides guidelines on threats and safeguards with regard to:

Client Acceptance

Engagement Acceptance

Changes in a Professional Appointment

PART B

Conflicts of Interest

This section sets out the obligation of the Professional Accountant to identify circumstances which may create threats of conflict of Interest, evaluate the significance of any threats and apply safeguards or additional safeguards.

PART B

Conflicts of Interest faced by the Professional Accountant in Public Practice which create threats to objectivity and which may create threats to the other Fundamental Principles:

Providing services to clients whose interests on the particular matter are in conflict; e.g.

Providing services to a client whose interest and that of the accountant on the matter are in conflict. e.g.

PART B

What the Professional Accountant in Public Practice should do:

When identifying and evaluating the interests and relationships, exercise professional judgment

When addressing conflicts of interest, remain alert to the Fundamental Principle of Confidentiality

PART B

What to do:

If the threat created by a conflict of interest is not at acceptable level, apply safeguards to eliminate or reduce the threat, if not decline or discontinue the professional relationship

Before accepting a new engagement take steps to identify circumstances which might create a conflict of interest. These include nature of relationship, the service and the parties

PART B

What to do: ( cont. )

Have an effective conflict identification process in order to identify actual or potential conflicts of interest before accepting or continuing an engagement. The process of identifying conflicts depends on nature of services to be provided, size of the firm, size and nature of client and structure of the firm

PART B

What to do: ( cont. )

If a conflict of interest has been identified, evaluate the

the significance of the interests or

relationship and

the significance of the threats created by

performing the professional services

PART B

What to do: ( cont. )

When there are threats to compliance with Fundamental Principles created by conflict of interest, apply safeguards, such as:

a) mechanism to prevent unauthorised disclosure of confidential information

b)regular review of the safeguards

c)get somebody independent to review the

work performed

d) consult third party

PART B

What to do: ( cont. )

Disclose the nature of the conflict of interest and related safeguards to the client affected by the conflict. Forms of disclosure include:

a) General disclosure to clients

b) Specific disclosure to affected clients

Obtain the client’s consent to the accountant performing the professional services

PART B

Second Opinion:

Where a Professional Accountant in Public Practice is asked for second opinion, he/she shall identify and evaluate the significance of any threats to compliance with Fundamental Principles and apply appropriate safeguards.

PART B

Fees and Other Types of Remuneration:

Fees may create threats to compliance with Fundamental Principles e.g. a self-interest threat to professional competence and due care if the fee quoted is too low.

PART B

Marketing Professional Services:

A Professional Accountant in Public Practice shall be honest and truthful when marketing his/her professional services.

Do not make exaggerated claims in respect of services offered, qualifications and experience

Do not make references to the work of others

PART B

Gifts and Hospitality:

Offers of gifts and hospitality from clients may create threats to compliance with Fundamental Principles e.g. threat to objectivity

Evaluate the significance of the threat and apply safeguards.

If threats cannot be eliminated or reduced, do not accept such an offer

PART B

Custody of Client Assets:

A Professional Accountant in Public Practice shall not assume custody of client monies or assets unless permitted by law.

Threats created by this include self-interest threat to professional behavior and of objectivity. Safeguards include: Keeping client assets separate and use them only for the intended purpose. Comply with the law

PART B

Objectivity - All Services:

A Professional Accountant in Public Practice shall determine, at the outset, whether there are threats to compliance with the Fundamental Principle of Objectivity because of the relationships with directors, officers or employees.

A Professional Accountant must be Independent in Mind and in Appearance

PART B

INDEPENDENCE:

Independence Requirements For Audit and Review Engagements have the objective of assisting firms and members of audit teams in applying the Conceptual Framework approach to achieving and maintaining Independence.

I.E. Independence of Mind and Independence in Appearance

PART B

INDEPENDENCE:

Independence Requirements for Other Assurance Engagements which are not audit or review engagements.

Compliance with the Fundamental Principle of Objectivity requires being Independent of assurance clients. It is in the public interest and therefore required by the Code of Ethics that firms and members of the assurance team be independent of the client.

PART C: APPLICATION OF THE IESBA CODE TO PROFESSIONAL ACCOUNTANTS IN BUSINESS

This Part explains the Application of Conceptual Framework Approach to Professional Accountants in Business. Investors, employers and the public may rely on the work of a Professional Accountant.

There are various forms of relationships with an employer, e.g. as a salaried employee or director

Threats to compliance with Fundamental Principles may therefore exist

PART C

1. Conflicts of Interest:

A professional accountant in business may be faced with a conflict of interest when undertaking a professional activity. Threats created by the conflict may occur when:

a) The accountant undertakes professional

activity for parties with conflicting interests

b) The interest of the accountant and those of the other party are in conflict

PART C

What to do:

Apply professional judgment when identifying and evaluating the interests and relationships

Seek guidance when addressing a conflict of interest. Guidance from within the employing organization or from others

Apply safeguards to eliminate the threat or to reduce it to acceptable level

PART C

What to do: ( cont. )

Apply one or more of the following safeguards:

a) Restructuring or segregating certain duties

b)Obtaining appropriate oversight

c)Withdraw from the decision-making process

d)Consult with third parties e.g. NBAA, legal

counsel or an other accountant

PART C

2. Preparation and Reporting of Information:

Financial information shall be prepared and presented fairly, honestly and in accordance to professional standards.

Threats to compliance with Fundamental Principles may exist e.g. self- interest or intimidation threats to integrity, objectivity or professional competence or due care

The significance of the threats should be evaluated and necessary safeguards applied

PART C

What to do:

Be alert to the principle of integrity, which imposes an obligation to be straightforward and honest in all business and professional relationships

Evaluate the significance of the threat and apply safeguards when necessary e.g. consult with superiors or the audit committee etc.

PART C

What to do: ( cont. )

Refuse to be or remain associated with misleading information

Take steps to disassociate yourself from the misleading information if you have been associated with it unknowingly

Obtain legal advice to determine whether to report the circumstances outside the organization

PART C

3. Acting with Sufficient Expertise:

A professional Accountant shall not mislead an employer as to the level expertise or experience possessed. Be ready to seek appropriate expert advice or assistance

Threats to compliance may be created by insufficient time, information, experience and even resources.

Appropriate safeguards shall be applied.

PART C

4. Financial Interests, Compensation and Incentives Linked to Financial Reporting and Decision Making

A Professional Accountant may have financial interests in the entity, e.g. shares, share options, profit related bonuses etc.

Self-interest threats arising from compensation and incentives may be compounded by pressure from superiors or peers

PART C

What to do:

Be particularly alert to the principle of integrity which imposes an obligation to be straightforward an honest in all professional and business relationships

Evaluate the significance of any threat created and safeguards applied. In doing so, evaluate the nature and significance of the interest. Examples of safeguards to be applied:

PART C

5. Inducements:

5(a)Receiving Offers

Offers of inducements may create threats to compliance with Fundamental Principles.

Evaluate the significance of any threat and apply safeguards when necessary e.g. inform higher level of management, inform third party e.g. professional body

PART C

5. Inducements:

5(b) Making Offers

A Professional Accountant may be in a situation where he/she is expected or under pressure to offer an inducement

Do not offer an inducement to improperly influence professional judgment of a third party

CHANGES TO THE CODE OF ETHICS RESPONDING TO NOCLAR

NOCLAR = Non Compliance with Laws & Regulations

Breaches comprise act of:

• Omission or commission,

• Intentional or unintentional, committed by a clientor employer, or by those charged with governance, by management or by other individuals working for or under the direction of a client or employer which is contrary to the prevailing laws or regulations.

Breaches may be Real or Potential/Suspected

RESPONDING TO NOCLAR

CHANGES TO THE CODE ARE IN Section 225: Applies to Professional

Accountants in Public Practice( new section )

Section 360: Applies to ProfessionalAccountants in Business( new section )

Sections 100, 140, 150, 210 and 270( existing sections )

Effective date will be 15 July 2017

CODE OF ETHICS - CONFIDENTIALITY

• Professional Accountants should respect confidentiality of information acquired as a result of professional and business relationships and should not disclose any such information to 3rd parties without proper and specific authority unless there is a legal or professional right or duty to disclose

• This applies to information relating to legal acts or transactions

RESPONDING TO NOCLARA PROFESSIONAL ACCOUNTANT MUST ACT WHERE: • Bank’s Head of Accounts becomes aware of tempering with details of

certain data which would influence numbers• Bank’s Head of Accounts is aware that there has been breaches of

certain BOT regulations e.g. insider lending etc• Head of Accounts is aware of substantial breaches of VAT; W/T or

other tax law legally exposing the company to substantial liability• The Auditor observes a client has breached Tax or other laws with

severe consequence/liabilities• Head of Accounts makes adjustments to overstate/understate profit• Junior accountant observes Chief Accountant/Finance Manager or

his company has breached laws• Head of Accounts makes procurements without following PPA Or in

the absence of budget/vote ( for government enterprises )• No action is taken on reported NOCLAR

CHANGES TO THE CODE – WHY?

• Public Opinion – accountants must do more

• Revitalise the relevance of our profession i.e. demonstration of acting in the public interest

• Protection of CPA-PP & CPA - fear of breaching client/employer confidentiality

• Whistleblowing protection

• Raising CPA-PP & CPA status above bar

• Assigning some personal responsibility

CHANGES TO THE CODE – WHY?

• Provides a clear pathway for CPA-PP & CPAs to disclose potential non-compliance situations to appropriate public authorities in certain situations without being constrained by the ethical duty of confidentiality

• Emphasis on the role of senior-level CPAs in business in promoting a culture of compliance with laws & regulations and prevention of non-compliance within their entities.

• Encouraging Junior level CPAs to take action

In conclusion: Be up to date by attending CPD programs

THANK YOU

AND

BEST WISHES

Simon C. Mponji