INDEPENDENCE, OBJECTIVITY, INTEGRITY, CONFIDENTIALITY, SKILLS, CARE AND COMPETENCE

Independence

IFAC Code of Ethics for Professional Accountants states that “it is in the public
interest and, therefore, required by this Code of Ethics, that members of
assurance teams, firms and, when applicable, network firms be independent
of assurance clients”.
The Code states that “Assurance engagements are intended to enhance the
credibility of information about a subject matter by evaluating whether the
subject matter conforms in all material respects with suitable criteria. The
International Standard on Assurance Engagements issued by The International
Auditing and Assurance Standards Board (IAASB), describes the objectives
and elementsof assurance engagements to provide, either a high or a moderate
level of assurance. IAASB has also issued specific standards for certain
assurance engagements. For example, International Standards on Auditing
provide specific standards for audit (high level assurance) and review
(moderate level assurance) of financial statements”.
The Code provides guidance to auditors in determining whether a particular
engagement is an assurance engagement and states that, this will depend
upon whether the assurance engagement exhibits all of the following elements:
(a) A three party relationship involving:
(i) A professional accountant;
(ii) A responsible party; and
(iii) An intended user;
(b) A subject matter;
(c) Suitable criteria;
(d) An engagement process; and
(e) A conclusion.
There is a broad range of engagements to provide a high or moderate level of
assurance. Such engagements may include:
(a) Engagements to report on a broad range of subject matters covering
financial and non-financial information;
(b) Attest and direct reporting engagements;
(c) Engagements to report internally and externally; and
(d) Engagements in the private and public sector.
The subject matter of an assurance engagement may take many forms, such
as the following:
(a) Data (for example, historical or prospective financial information,
statistical information, performance indicators);
(c) Systems and processes (for example, internal controls); or
(d) Behaviour (for example, corporate governance, compliance with
regulation, human resource practices).
The Code further identifies that not all engagements performed by professional
accountants are assurance engagements. Other engagements frequently
performed by professional accountants that are not assurance engagements
include:
(a) Agreed-upon procedures;
(b) Compilation of financial or other information;
(c) Preparation of tax returns when no conclusion is expressed, and tax
consulting;
(d) Management consulting; and
(e) Other advisory services.
The Code also provides a conceptual approach to independence which requires
the following:
Independence requires:
(a) 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 scepticism; and
(b) 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 safeguards applied, would reasonably conclude
that a firm’s, or a member of the assurance team’s integrity, objectivity
or professional scepticism had been compromised.

Rules of Professional Conduct

The ‘Rules of Professional Conduct for Members’ issued by The Institute of
Chartered Accountants of Nigeria provides guidance on integrity, objectivity
and independence. The Rules require that a member should behave with
integrity in all professional, business and financial relationships. The Rules
also call for a degree of objectivity and independence to be exercised by a
member of the Institute in financial reporting and similar roles outside the
audit.

Integrity and objectivity

IFAC Code of Ethics states that “integrity implies not merely honesty but fair
dealing and truthfulness. The principle of objectivity imposes the obligation
on all professional accountants to be fair, intellectually honest and free of
conflicts of interest”.
The Code identifies that, professional accountants serve in many different
capacities and should demonstrate their objectivity in varying circumstances.
Professional accountants in public practice undertake assurance engagements,
and render tax and other management advisory services. Other professional
accountants prepare financial statements as a subordinate of others, perform
internal auditing services, and serve in financial management capacities in
industry, commerce, the public sector and education. They also educate and
train those who aspire to be admitted into the profession. Regardless of service
or capacity, professional accountants should protect the integrity of their
professional services and maintain objectivity in their judgement.
In selecting the situations and practices to be specifically dealt with, in ethics
requirements relating to objectivity, the Code states that adequate consideration
should be given to the following factors:
(a) Professional accountants are exposed to situations which involve the
possibility of pressures being exerted on them. These pressures may
impair their objectivity;
(b) It is impracticable to define and prescribe all such situations where
these possible pressures exist. Reasonableness should prevail in
establishing standards for identifying relationships that are likely to,
or appear to, impair a professional accountant’s objectivity;
(c) Relationships should be avoided which allow prejudice, bias or influence
of others to override objectivity;
(d) Professional accountants have an obligation to ensure that personnel
engaged on professional services adhere to the principle of objectivity;
and
(e) Professional accountants should neither accept nor offer gifts or
entertainment which might reasonably be believed to have a significant
and improper influence on their professional judgement or those with
whom they deal. What constitutes an excessive gift or offer of entertainment
varies from country to country but professional accountants should avoid
circumstances which would bring their professional standing into
disrepute.
In addition to the above, the ‘Rules of Professional Conduct for Members’ issued
by the Institute of Chartered Accountants of Nigeria provides a framework within
which members can identify actual or potential threats to objectivity and assess
the safeguards which may be available to offset such threats.

Professional Competence

The IFAC Code of Ethics for Professional Accountants states that professional
accountants should not portray themselves as having expertise or experience
which they do not possess.
Professional competence may be divided into two separate phases:
(a) Attainment of professional competence
The attainment of professional competence requires initially a high
standard of general education followed by specific education, training
and examination in professionally relevant subjects, and whether
prescribed or not, a period of work experience. This should be the normal
pattern of development for a professional accountant.
(b) Maintenance of professional competence
(i) The maintenance of professional competence requires a continuing
awareness of developments in the accountancy profession
including relevant national and international pronouncements
on accounting, auditing and other relevant regulations and
statutory requirements.
(ii) A professional accountant should adopt a program designed to
ensure quality control in the performance of professional services
consistent with appropriate national and international
pronouncements.
The ‘Rules of Professional Conduct for Members’ issued by The Institute of
Chartered Accountants of Nigeria provides that a member should not accept or
perform work which he or she is not competent to undertake, unless he or she
obtains such advice and assistance as will, enable him or her competently
carry out the work.

Confidentiality

The IFAC Code of Ethics states that professional accountants have an obligation
to respect the confidentiality of information about a client’s or employer’s affairs
acquired in the course of professional services. The duty of confidentiality
continues even after the end of the relationship between the professional
accountant and the client or employer. The Code states that:
(a) Confidentiality should always be observed by a professional accountant
unless specific authority has been given to disclose information or there
is a legal or professional duty to disclose.
(b) Professional accountants have an obligation to ensure that staff under
their control and persons from whom advice and assistance is obtained
respect the principle of confidentiality.
(c) Confidentiality is not only a matter of disclosure of information, It also
requires that a professional accountant acquiring information in the
course of performing professional services does, neither use, nor appear
to use that information for personal advantage, or for the advantage of
a third party.
(d) A professional accountant has access to a lot of confidential information
about a client’s or employer’s affairs not otherwise disclosed to the
public. Therefore, the professional accountant should be relied upon not
to make unauthorised disclosures to other persons. This does not apply
to disclosure of such information in order to properly discharge the
professional accountant’s responsibility according to the profession’s
standards.
(e) It is in the interest of the public and the profession that, the profession’s
standards relating to confidentiality be defined and guidance given on
the nature and extent of the duty of confidentiality and the circumstances
in which disclosure of information acquired during the course of
providing professional services shall be permitted or required.
(f) It should be recognised, however, that confidentiality of information is
part of statute or common law and therefore detailed ethical
requirements in respect thereof, will depend on the law of the country of
each member body.
Matters which should be considered in determining whether confidential
information may be disclosed are as follows:
(a) When disclosure is authorised - when authorisation to disclose is given
by the client or the employer, the interests of all the parties including
those third parties whose interests might be affected should be
considered.
(b) When disclosure is required by law - examples of when a professional
accountant is required by law to disclose confidential information are:
(i) To produce documents or to give evidence in the course of legal
proceedings; and
(ii) To disclose to the appropriate public authorities infringements
of the law which come to light.
(c) There is a professional duty or right to disclose when need arises:
(i) To comply with technical standards and ethics requirements; such
disclosure is not contrary to this section;
(ii) To protect the professional interests of a professional accountant
in legal proceedings;
(iii) To comply with the quality (or peer) review of a member body or
professional body; and
(iv) To respond to an inquiry or investigation by a member bodyor
regulatory body.
When the professional accountant has determined that confidential information
can be disclosed, the following points should be considered:
(a) Whether or not all the relevant facts are known and substantiated, to
the extent it is practicable to do so; when the situation involves
unsubstantiated fact or opinion, professional judgement should be used
in determining the type of disclosure to be made, if any;
(b) What type of communication is expected and the addressee; in particular,
the professional accountant should be satisfied that the parties to whom
the communication is addressed are appropriate recipients and have
the responsibility to act on it; and
(c) Whether or not the professional accountant would incur any legal liability
having made a communication and the consequences thereof.
In all such situations, the professional accountant should consider the need to
consult legal counsel and/or the professional organisation(s) concerned.
The ‘Rules of Professional Conduct for Members’ issued by the Institute of
Chartered Accountants of Nigeria provides, in relation to confidentiality, that
(a) Information confidential to a client or employer acquired in the course
of professional work should not be disclosed except where consent has
been obtained from the client, employer or other proper source, or where
there is a legal right or duty to disclose.
(b) Where a legal right or duty of disclosure does exist, the client or employer
should normally be notified in advance of the disclosure being made.

Skills, care and diligence

The ‘Rules of Professional Conduct for Members’ issued by The Institute of
Chartered Accountants of Nigeria provides that a member should carry out his
or her professional work with due skill, care, diligence and expedition and
with proper regard for technical and professional standards expected of him or
her as a member. A member should conduct himself or herself with courtesy
and consideration towards all with whom he comes into contact, during the
course of performing his or her work. Under the section on Professional
Competence and Due Care of the Fundamental Principles as contained in the
IFAC Code of Ethics for Professional Accountants, it is stated that “a professional
accountant should perform professional services with due care, competence
and diligence and has a continuing duty to maintain professional knowledge
and skill at a level required to ensure that a client or employer receives the
advantage of competent professional service based on up-to-date developments
in practice, legislation and techniques”.

Publicity

The IFAC Code of Ethics for Professional Accountants provides guidance on
Publicity. It states that in the marketing and promotion of themselves and their
work, professional accountants should:
(a) Not use means which bring the profession into disrepute;
(b) Not make exaggerated claims for the services they are able to offer, the
qualifications they possess, or experience they have gained; and
(c) Not denigrate the work of other accountants.
The ‘Rules of Professional Conduct for Members’ issued by the Institute of
Chartered Accountants of Nigeria provides as follows:
In relation to practice promotion, a member may seek publicity for his or her
services, achievements and products and may advertise his or her services,
achievements and products in any way consistent with the dignity of the
profession in that he should not project an image inconsistent with that of a
professional person bound to high ethical and technical standards.
In relation to advertisement, the code states that advertisement must comply
with the law and should be legal. An advertisement should be clearly
distinguishable as such.

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