PROFESSIONAL PRONOUNCEMENTS AND THEIR APPLICATIONS

Guidelines and standards of the Institute and other International Bodies.

Ethics

(a) Ethics refers to a system or code of conduct based on moral duties, values
and obligations that indicates how we should behave within a constituted
body or society.
(b) Professionalism refers to the conduct, aims, or qualities that characterise
or mark a profession or professional person in the context of the
professional body to which the person belongs.
(c) Without independence, the user will place little reliance on the report of
the auditors.

Code of Ethics Issued by the Institute of Chartered Accountants of Nigeria

In Nigeria, the auditor must comply with the ‘Rules of Professional Conduct for
Members’ issued by the Institute of Chartered Accountants of Nigeria and
accounting standards issued by the Nigerian Accounting Standards Board. The
Ethical Code covers the following matters:
(a) fundamental principles;
(b) integrity, objectivity and independence;
(c) conflicts of interest;
(d) confidentiality;
(e) changes in professional appointment;
(f) consultancy;
(g) association with non-members;
(h) fees;
(i) obtaining professional work;
(j) the names and letterheads of practicing firms;
(k) second and other opinions;
(l) members in business; and
(m) enforcement of ethical standards.

Professional conduct for the members of the Institute of Chartered
Accountants of Nigeria

The following guidelines on professional conduct are issued by the Institute to
guide its members in the efficient discharge of their professional duties. The
contents of the ‘Rules of Professional Conduct for Members’ serve as a guide to
members of the Institute which require strict observance of these rules of conduct
as condition for its membership. If a member cannot find the guidance he or
she requires either in the Institute of Chartered Accountants of Nigeria Act, in
the Rules and Regulations of the Institute or in official statements by the Council
he or she is always free to seek further advice through the Registrar/Chief
Executive of the Institute. The decision as to whether or not a particular situation
constitutes a breach lies entirely with the Investigating Panel, after due
consideration of representation(s) if any by the member committing the alleged
breach. The Accountants’ Disciplinary Tribunal deals with deserving cases
recommended by the Investigating Panel.

Fundamental principles

(a) A member should behave with integrity in all professional and business
relationships. Integrity implies not mere honesty but fair dealing and
truthfulness;
(b) A member should strive for objectivity in all professional and business
judgements. Objectivity is the state of mind which has regard to all
considerations relevant to the task in hand but no other;
(c) 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;
(d) 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; and
(e) 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.

Integrity, Objectivity and Independence

(a) Integrity: A member should behave with integrity in all professional,
business and financial relationships. Integrity implies not mere honesty
but fair dealing and truthfulness.
(b) Objectivity: Objectivity is essential for any professional person exercising
professional judgement. It is as essential for members in business as
for practicing members. Objectivity is the state of mind which has regard
to all considerations relevant to the task in hand but no other. It is
sometimes described as ‘independence of mind’. The need for objectivity
is particularly evident in the case of a practicing accountant carrying
out an audit or some other reporting role where his or her professional
opinion is likely to affect rights between parties and the decisions they
take.
(c) Independence: A member must exercise objectivity and independence
required of an auditor. He or she must have both independence of mind
and independence in appearance.
(d) An accountant should always act with integrity, honesty and probity,
and maintain a professional attitude in the performance of his
responsibilities. He should, if in public practice, not follow any other
occupation which is inconsistent with his professional duties.
(g) A member should exercise his profession with independence and
objectivity. He must be in a position to give an honest and unbiased
opinion. Under no circumstances must a member knowingly allow his
name to be associated with a financial statement that is misleading.
Pursuant to the above and, in order to exercise his independence, an
accountant, in public practice, must not:
(i) possess any direct and/or indirect beneficial interest in any
Company for which he or his firm acts as auditors;
(ii) accept fees, the amount of which is based on the success of an
assignment, except where this cannot be avoided because of
legislation or agreement to which he is not a party;
(iii) accept fees, the amount of which is based on the turnover of the
company for which he is acting as auditor;
(iv) act for any two opposing parties in respect of a negotiation, claim
or settlement unless appointed as an arbitrator under due process
of law;
(v) carry out the work as an auditor concurrently with carrying out
work for the client in an executive capacity.
Note: “Indirect beneficial interest” means interest through a nominee.

Conflicts of Interest

(a) A member should not accept or continue an engagement in which there
is or likely to be a significant conflict of interests between the firm and
its client.
(b) There is, on the face of it, nothing improper in a firm having two or more
clients whose interests may be in conflict. In such a case, however, the
work of the firm should be so managed as to avoid the interests of one
client adversely affecting those of another. Where the acceptance or
continuance of an engagement would, even with safeguards, materially
prejudice the interests of any client, the appointment should not be
accepted or continued, or one of the appointments should be
discontinued.

Confidentiality

(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 legal right or duty to disclose; and
(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.
A member should respect the confidentiality of information entrusted to him
by his employer or his client, and should not disclose any such information to a
third party without the specific authority of his employer or client unless:
(i) He knows or suspects his clients to have committed the offence of treason
or treasonable felony. The duty to disclose is obligatory in this case;
(ii) The disclosure is reasonably necessary to protect the interest of members
e.g. to enable the member to sue for his fees or to defend an action for
(say) negligence;
(iii) He is required to disclose by due legal process or in the interest of the
public.
When a member is required to provide information about a client’s affairs by
the Police, the Inland Revenue or any other authority, he should decline to give
the information unless and until he is satisfied that there is statutory authority
for demanding the information. He should seek the advice of his solicitor where
necessary.
A member should not voluntarily appear in Court as a witness against a client
or former client unless served with a subpoena or any other form or witness
summons. He could refuse particular questions which he is not obliged to
answer. He must produce any documents in his ownership or possession if the
Court so directs.
A member should not make improper use of any knowledge he may gain in the
course of his work. He should ensure that the staff under his control also observes
this requirement.

Changes in a professional appointment

Recurring Work: Clients have the right to choose their auditors and other
professional advisers, and to change to others if they so desire.
Nevertheless, it is necessary - in the interests of the public, the existing auditor
or adviser and prospective auditor or adviser - for a member who is asked to
act by a prospective client in respect of an audit or recurring reporting
assignment, or the provision of recurring accounting services and taxation work
of a compliance nature, to communicate with the existing auditor or adviser,
and for the latter to reply promptly as to any considerations which might affect
the prospective auditor or adviser’s decision whether or not to accept
appointment.
(a) Statutory Provisions: Firms must adhere to the statutory provisions
relating to any change in an audit appointment, in particular those
contained in sections 362 to 366 of the Companies and Allied Matters
Act 2004, and in particular the proposed auditor should ensure that the
previous auditor has validly vacated office.
(b) Unpaid fees: A member in public practice should not accept an audit
hitherto carried out by another member, without first ensuring that the
other member has been properly removed from office as auditor and
that all outstanding fees due to the other member have been fully paid.
(c) Confidentiality: The prospective auditor or adviser should ordinarily treat
in confidence any information provided by the existing auditor or adviser.
However, it may be essential to the fulfilment of a prospective auditor’s
or adviser’ obligations that he should disclose such information. It may,
for example, be unavoidable for the prospective auditor or adviser to
disclose to officers or employees of the client matters brought to his
attention by the predecessor firm which needed to be properly
investigated. Such disclosure should be no wider than is necessary.
(d) Defamation: It is likely that an existing auditor or adviser who
communicates to a prospective successor matters damaging to the client
or to any individuals concerned with the client’s business will have a
strong measure of protection were any action for defamation to be
brought against him, in that the communication will be protected by
qualified privilege. This means that he should not be liable to pay
damages for defamatory statements even if they turn out to be untrue,
provided that they are made without malice. The chances of an incumbent
being held to have acted maliciously are remote provided that:
(i) he states only what he sincerely believes to be true; and
(ii) he does not make reckless imputations against a client or
individuals connected with it which he can have no reason for
believing to be true.
(e) Joint auditor: A member whose firm is nominated as a joint auditor
should communicate with all existing auditors and be guided by similar
principles to those set out in relation to nomination as an auditor. Where
it is proposed that a joint audit appointment becomes sole appointment,
the surviving auditor should communicate formally with the other joint
auditor as though for a new appointment.
(f) Vacancy: A member whose firm is invited to accept nomination on the
death of a sole practitioner auditor should endeavour to obtain such
information as he may need from the latter’s alternate (where
appropriate), the administrators of the estate or other source.
(g) Transfer of Books and Papers: A replaced auditor or adviser should
transfer promptly to the client, or to his successor after the latter has
been duly appointed, all books and papers which are in his possession
and which belong to the client unless he is exercising a lien thereon for
unpaid fees. Members should be aware that the courts have held that
no lien can exist over books or documents of a registered company which,
either by statute or by article of association of the company have to be
available for public inspection.
(h) Co-operation with a Successor: The incoming auditor or adviser often
needs to ask his predecessor for information as to the client’s affairs,
lack of which might prejudice the client’s interests. Such information
should be promptly given and, unless there is good reason to the contrary,
such as a significant amount of work involved, no charge should be
made.
(i) Additional work: A member invited to undertake recurring or nonrecurring
work which is additional to and related to continuing work
carried out by another professional adviser should normally notify that
other professional adviser of the work he has been asked to undertake.
(j) Consultancy: If a member in practice ( the practitioner) obtains the advice
of a member (consultant) on a consultancy basis on behalf of a client,
the consultant or any practicing firm with which he or his consultancy
organisation is associated should not, without the consent of the
practitioner, accept from that client within one year of completion of the
consultancy assignment any work which was, at the time the consultant
was first retained in relation to that client’s affairs, being carried out by
the practitioner;
(k) The same considerations apply where a practitioner introduces one of
his clients to the consultant for the purposes of consultancy.

Association With Non-Members

(a) Mixed Accountancy Practices: A member engaged in public practice with
a non-member partner or fellow director of a company is responsible
for ensuring that the non-member conforms to the ethical standards
governing the provision by members of public accountancy services;
(b) Use of Offices, Name, etc: A member should so conduct his or her firm
that a client or potential client cannot mistake it for any other firm or
business and cannot mistake any other associated firm business for his;
(c) Work for or obtained through Non-members: A member should not enter
into arrangements to provide public accountancy services to clients of
another firm or to clients introduced by another firm of public accountants
not controlled by chartered accountants (the requesting firm) unless he
or she has satisfied himself or herself that the requesting firm’s
professional work is obtained in accordance with ethical standards
governing the provision by members of public accountancy services

Fees

Member are expected to charge fees for the service rendered to clients. The
Institute has advised that a member is entitled to charge for his or her services:
(a) Such specific fee as he or she has agreed with the client; or
(b) A fee calculated in accordance with any agreement with the client; or
(c) In the absence of an agreement, a fee calculated by reference to the
custom of the profession or in accordance with regulations of the Institute
in force, at the time the fees were charged.
In the last event it is customary, where the basis of the fee has not been agreed
with a client that a member should charge a fee, which is fair and reasonable
having regards to:
(a) the seniority and professional expertise of the persons necessarily
engaged on the work;
(b) the time expended by each;
(c) the degree of risk and responsibility which the work entails; and
(d) the priority and importance of the work to the client together with any
expenses properly incurred.
The Institute’s minimum charge-out rates in respect of fees for professional
services are intended to set a benchmark for such fees below which members
are not ordinarily expected to charge. A member in public practice must not
charge or accept fees for acting as auditor, the amount of which is below any
minimum fee chargeable under any scheme approved by the Institute.

Fee Quotation and Estimates

A member should inform a client in writing prior to commencement of any
engagement of the basis upon which any fee he proposes to charge that client
for his services will be calculated and, on request and where practicable, the
level of fees likely to be charged for any assignment.

Audit Work

Firms should not quote for new work, a level of fees which is lower than that
charged by an existing auditor or quote by tender levels of fees which they
have reason to believe are significantly lower than those quoted by other
tendering firms as their objectivity could in those circumstances be threatened.
Such firms should ensure that their work complies with Auditing Standards
and Guidelines and, in particular, quality control procedures. In the event of a
complaint being made to the Institute (which might have arisen as a result of
a Professional Practice Monitoring Committee’s inspection), where fees were a
feature in obtaining or retaining the work, firms should be prepared to
demonstrate that the work done was in accordance with Auditing Standards;
and the client was not misled as to the basis on which fees for the current year
and the subsequent years were to be determined.

Fee Information and Disputes

A member should furnish, either in the fee account or subsequently on request,
and without further charge, such details as are reasonable to enable the client
to understand the basis on which the fee account has been prepared.

Percentage and Contingent Fees

Unless the circumstances dictate otherwise or the client clearly objects, fees
should normally be charged on time rates in respect of audit work, reporting
assignment and similar non-audit roles. In all circumstances, a member in
public practice should refrain from quoting or charging fees for audit work,
reporting assignment and similar non-audit roles using criteria other than the
basis or bases approved by the Institute.

OBTAINING PROFESSIONAL WORK

Practice Promotion

Subject to the guidance which follows, a member may seek publicity for his or
her services achievements and products and may advertise his 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 by high ethical and technical standards.

Advertising

Advertisements must comply with the law and should be legal, decent, clear,
honest and truthful. An advertisement should be clearly distinguishable as
such. The preceding considerations are of equal application to letterheads,
invoices and similar practice documents.

Fees

If reference is made in promotional material to fees, the basis on which fees
are calculated, or to hourly or other charging rates, the greatest care should be
taken to ensure that such reference does not mislead as to the precise range of
services and time commitment that the reference is intended to cover. Members
should not make comparisons in such material between their fees and of other
accounting practices, whether members or not.
The danger of giving a misleading impression is particularly pronounced when
constraints of space limit the amount of information which can be given. For
this reason, it will seldom be appropriate to include information about fees in
short advertisements. A member may be offered a free consultation at which
levels of fees will be discussed.

Disparaging Statements

Promotional material may contain any factual statement the truth of which a
member is able to justify, but should not make disparaging references to or
disparaging comparisons with the services of others.
Particular care is needed in claims of size or quality. For example, it is
impossible to know whether a claim to be ‘the largest firm’ in an area is a
reference to the number of partners or staff, the number of offices or the amount
of fee income. A claim to be ‘the best firm’ is subjective and cannot be
substantiated.

Harassment

A member should, under no circumstances, promote or seek to promote his or
her services, or the services of another member, in such a way or to such an
extent as to amount to harassment of a prospective client.

Cold Calling

(a) In relation to audit or other financial reporting work, a member should
not make an unsolicited personal visit or telephone call to a person who
is not a client with a view to obtaining professional work from the nonclient.
(b) Promotional or technical material may be sent to non-client by mail or
other means, subject to certain conditions. Such a distribution should
not, in the case of audit or other financial reporting work, be followed by
a personal visit or telephone call except at the specific request of the
recipient.
(c) The same constraints apply to direct mail as to other promotional or
technical material.
(d) Unsolicited promotional or technical material should not be sent to a
non-client by facsimile transmission or other electronic means.
A member may send a letter introducing his or her firm and its range of
services to another professional adviser, such as a solicitor or banker,
and follow it up by a telephone call or visit. Such a follow-up should not
be made in respect of audit or other financial reporting needs of the
professional adviser.

Introductions

A member should not give or offer any commission, fee or reward to a third
party, not being either his or her employee or another public accountant
governed by ethical standards comparable to those observed by members in
return for the introduction of a client.

Responsibility for Promotional Activities

Promotional activities carried out in the name of a firm should be construed as
promotional activities carried out by the individual principals of that practice,
whether carried out personally or through agents. The names and letterheads
of practising firms

Names

(a) ‘Firm’ includes partnership, a corporation and a sole practitioner, the
main business of which is the provision of services customarily provided
by chartered accountants, while the term ‘letterhead’ means any part of
the firm’s notepaper and documents used by the firm for communicating
with clients or other parties.
(b) Public practice should refrain from practising in or under a name which
does not comprise proper name(s) only, such name(s) being that or those
of one or more of the current or former proprietor(s) and/or partner(s) of
the Firm.
(c) A practice name should be consistent with the dignity of the profession
in the sense that it should not project an image inconsistent with that of
a professional practice bound to high ethical and technical standards.
A practice name should not be misleading.
(d) Use of the description ‘Chartered Accountants’ is governed by the law
establishing the Institute.
(e) Firms entitled to use the description ‘Chartered Accountants’ are
encouraged to do so, on their letterheads, in advertisements and
generally. A firm which describes itself as ‘Chartered Accountants’ on
its notepaper may include a list of the services it particularly wishes to
offer. However, it should not incorporate any of that list of services into
the general description of the firm (e.g. ‘Chartered accountants and Tax
Advisers’) lest, this should suggest that these services are not offered by
other chartered accountants.
(f) Principals in a firm describing itself as ‘Chartered Accountants’ should
adopt a distinguishing name for any separate firm of public accountants
in which they may practise which is not itself entitled to the description
‘Chartered Accountants’.

Persons Named on Letterheads

(a) It should be clear from the letterhead of a practice whether any person
named thereon, or other persons named only in the name of the firm, is
a partner of the practice, a sole practitioner or, in the case of a corporate
practice, a director.
(b) Firms should distinguish chartered accountants mentioned on the
letterhead of a practice from persons not entitled to be so described by
the use of designatory letters or otherwise.
(c) No person named on the letterhead of a practice should be described by
a title, description or designatory letters to which he or she is not entitled.

SECOND AND OTHER OPINIONS

Specific Circumstances

Where the opinion of a member, whether in practice or otherwise, is sought on
the application of accounting standards or principles to specific circumstances
or transactions, either completed or contemplated of an entity with which the
member does not have an ongoing professional relationship to provide audit
services, he should be alert to the possibility of his opinion creating undue
pressure on the judgement and objectivity of the auditor. Accordingly, he should
seek to minimise the risk of giving inappropriate guidance by ensuring that he
has access to all relevant information.

General Circumstances

A member giving an opinion on the application of accounting standards or
principles, relating to a hypothetical situation and not based on the specific
facts or circumstances of a particular organisation, should ensure that the nature
of the opinion is made clear.

MEMBERS IN BUSINESS

Employed member

‘Employed member’ includes reference to members, whether employed or not,
who are engaged in work relevant to their qualification as a member otherwise
than in a practicing office.
An employed member owes certain legal duties towards his or her employer.
Additionally, he or she has ethical duties towards his Institute, and, in particular,
he should observe the same code of ethics and the same standards of behaviour
and competence as apply to all other members of the Institute.

Financial and Other Involvement

An employed member should recognise the problems which may be created
by financial involvement or personal relationships which, whether sanctioned
by his or her contract of employment or not, could nevertheless by reason of
their nature or degree threaten his or her objectivity. Where any doubt exists,
the involvement or relationship should be disclosed.

Professional and Technical Standards

(a) A member is required to carry out his or her professional work with
proper regard for the technical and professional standards expected of
him as a member. The standards include Statements of Accounting
Standards issued by the Nigerian Accounting Standards Board and,
where appropriate, the rules and regulations of the Securities and
Exchange Commission and requirements of the Companies and Allied
Matters Act 2004. However, an employed member who, in the
performance of his professional work, may be subject to contrary
directions from his employers may be faced with a conflict of loyalties
in seeking to apply the fundamental principle. The difficulty is of
particular importance where the outcome of the work is to be published.
(b) Where a member has sole responsibility for the preparation and approval
of information, including management information, which is to be made
public or is to become available, on however restricted a basis, outside
the organisation to which it refers, he or she should ensure that such
information complies with the applicable standards, and relevant
statutes and regulation or, if it does not so comply, that the reasons for
non-compliance are stated truthfully, unambiguously and fairly.

Enforcement of ethical standards

(a) The power of the Institute to enforce ethical standards is by the Institute
of Chartered Accountants of Nigeria Act conferred on the Accountants
Disciplinary Tribunal which is in respect of this power independent of
the Council.

CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS ISSUED BY THE INTERNATIONAL FEDERATION OF ACCOUNTANTS

The auditor should comply with the Code of Ethics for Professional Accountants
issued by the International Federation of Accountants. The Code states that “in
order to achieve the objectives of the accountancy profession, professional
accountants have to observe a number of prerequisites or fundamental
principles”.
The fundamental principles are:
(a) Integrity
A professional accountant should be straight-forward and honest in
performing professional services.
(b) Objectivity
A professional accountant should be fair and should not allow prejudice
or bias, conflict of interest or influence of others to override objectivity.
(c) Professional Competence and Due Care
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.
(d) Confidentiality
A professional accountant should respect the confidentiality of
information acquired during the course of performing professional
services and should not use or disclose any such information without
proper and specific authority or unless there is a legal or professional
right or duty to disclose.
(e) Professional Behaviour
A professional accountant should act in a manner consistent with the
good reputation of the profession and refrain from any conduct which
might bring discredit to the profession. The obligation to refrain from
any conduct which might bring disrepute to the profession requires IFAC
member bodies to consider, when developing ethical requirements, the
responsibilities of a professional accountant to clients, third parties, other
members of the accountancy profession, staff, employers, and the general
public.
(f) Technical Standards
A professional accountant should carry out professional services in
accordance with the relevant technical and professional standards.
Professional accountants have a duty to carry out with care and skill,
the instructions of the client or employer insofar as they are compatible
with the requirements of integrity, objectivity and, in the case of
professional accountants in public practice, independence.
In addition, they should conform to the technical and professional
standards issue by:
(i) IFAC (e.g. International Standards on Auditing);
(ii) International Accounting Standards Board;
(iii) The member’s professional body or other regulatory body; and
(iv) Relevant legislation.

---

Share : Facebook Twitter Google+ Digg

Jika Anda menyukai Artikel di blog ini, Silahkan klik disini untuk berlangganan gratis via email, Anda akan mendapat kiriman artikel setiap ada artikel yang terbit di Our Akuntansi